Risk Concentration
Per-ZIP caps and actions to manage catastrophic concentration risk.
What This Means for You
We pinpoint your biggest exposure hotspots—by ZIP, county, or hazard type. Get a clear view of where risk is concentrated and specific actions (caps, pricing, syndication) to reduce it without losing revenue.
How It Works
Set per-ZIP caps based on CLIMA score and portfolio policy (default ≤15%).
Trigger actions: risk-pricing, syndication, diversification when >10%.
Key Capabilities
When You'll See Results
Adjust allocations in 3–12 months; enforce caps quarterly.
Technical Details
Formulas
Max Portfolio Allocation = min(0.15, max(0.05, Portfolio Allocation from Strategy))
Concentration Risk = 'HIGH' if Allocation > 10%, 'MODERATE' if > 5%, 'LOW' otherwise
Risk Pricing Premium = (4.0 - CLIMA Score) × 0.00375 if Score < 4.0, else (6.0 - Score) × 0.0015
Volume Reduction = min(0.40, Risk Pricing Premium × 20)
Syndication Percentage = min(0.60, (Allocation - 0.10) × 2) if Allocation > 10%
Concentration Reduction = Volume Reduction × Allocation
Revenue Impact = (1 - Volume Reduction) × (1 + Margin Improvement) - 1
Tail Loss Reduction = Baseline Tail Loss × (Allocation Reduction Percentage)
Disaster Loss Protection = Portfolio Size × Allocation Reduction × Disaster PD × LGD
Example
Bank has 25% allocation in Los Angeles County (CLIMA Score 3.0, $500M portfolio)
Current Allocation
25% (exceeds 15% cap and 10% threshold)
Concentration Risk
'HIGH'
Risk Pricing Premium = (4.0 - 3.0) × 0.00375 = 0.375%
37.5 bps
Volume Reduction = 0.375% × 20
7.5%
Syndication Percentage = min(0.60, (0.25 - 0.10) × 2)
30%
Allocation Reduction = 7.5% volume + 30% syndication
37.5% reduction
New Allocation = 25% × (1 - 0.375)
15.625%
Exposure Reduction = $500M × (0.25 - 0.15625)
$46.875M
Disaster Loss Protection = $46.875M × 6.25% PD × 56.3% LGD
$1.65M
Tail Loss Reduction = $50M baseline × 37.5%
$18.75M protected
Revenue Impact = (1 - 0.075) × (1 + 0.30) - 1
+19.75% (margin improvement)
Ready to Get Started?
Upload your portfolio or schedule a demo to see Risk Concentration in action.