Medical Expense Disability-Morbidity Decrease Stress

Overview

Article 155 requires the decrease-stress direction to be assessed when medical expense disability-morbidity risk may be adverse under lower claim-cost or medical-inflation assumptions.^[1]

Input Terms

• Current Claim Cost: Representative pre-stress medical expense claim cost for the portfolio slice being tested.^[1]
• Current Medical Inflation Rate: Inflation assumption used for medical payments in the technical provisions.^[1]

Technical Rationale

Article 155 uses paired increase and decrease stresses because medical expense disability-morbidity risk can be adverse in either direction depending on the benefit design, reserving basis, and premium structure.^[1] This page isolates the decrease assumption so the valuation model can evidence the lower claim-cost and medical-inflation scenario separately from the capital-selection step.

The decrease scenario remains separate because Article 155 selects the direction that is more adverse after the undertaking's valuation model measures the basic-own-funds effect.

Important Notes

• This is a stress-specification page, not a basic-own-funds loss bridge.
• Final medical expense disability-morbidity risk uses the larger prepared loss across the increase and decrease scenarios.