Health SLT Disability-Morbidity Risk

Overview

This calculator implements the gross capital requirement for Health SLT Disability-Morbidity Risk within the Solvency II standard formula.^[1] The Health Disability-Morbidity Risk requirement is defined as the economic capital necessary to cover the loss in basic own funds resulting from an adverse, permanent change in disability and sickness inception and recovery rates.^[2]

Input Terms

• Inception Rates (Health SLT): The base disability and sickness inception rates for the undertaking's long-term health portfolio.^[1]
• Recovery Rates (Health SLT): The base recovery rates for the undertaking's disability-benefit obligations.
• Scenario Severity: The requirement is equivalent to the loss in NAV resulting from a specified shock to inception and recovery rates, calibrated to a 1-in-200 year severity.

Technical Rationale

The Health SLT Disability-Morbidity Risk sub-module is calibrated to a 99.5% confidence level over a one-year horizon. It captures the sensitivity of the undertaking’s basic own funds to long-term sickness trends, which is critical for permanent health insurance and long-term care products where benefits are paid over extended periods.^[1]

The calculation uses a scenario-based approach, revaluing technical provisions under prescribed shocks to disability and sickness rates. This ensures the undertaking holds enough capital to absorb the increased lifecycle costs following a persistent deterioration in policyholder health trends. The final result represents the gross disability-morbidity component before diversification in Health SLT Underwriting Risk.

Important Notes

• Gross vs. Net SCR: This calculator determines the standalone Health SLT Disability-Morbidity Risk SCR. Solvency II risk is only finalized as a net impact on Basic Own Funds after diversification in the higher Health Risk aggregation chain, then within BSCR, and after the top-level LAC TP and LAC DT adjustments.
• Regulatory deviation: Material deviation from standard-formula assumptions at this layer may support a capital add-on or a move toward an internal model where justified.^[3]
• Reporting: The displayed result is intended to support the corresponding standard-formula component feeding the S.25.01.01 standard-formula reporting view.^[4]