Health SLT Lapse Risk

Overview

This calculator implements Health SLT Lapse Risk and compares the lapse-up, lapse-down, and mass-lapse losses on basic own funds, retaining the worst scenario as the standalone SLT lapse charge that later feeds Health SLT Risk.^[1]

Input Terms

• Basic Own Funds Before Stress: Basic own funds before applying the relevant underwriting stress scenario.
• Health SLT Lapse Stress Asset Change_{j}: Change in asset value under lapse scenario `j ∈ {up, down, mass}`.
• Health SLT Lapse Stress Technical Provisions Increase_{j}: Increase in technical provisions under lapse scenario j.
• Health SLT Lapse Stress Other Liabilities Increase_{j}: Increase in non-technical liabilities under lapse scenario j.
• Health SLT Lapse Stress Tax Effect_{j}: Tax relief or tax charge recognized under lapse scenario j.
• Health SLT Lapse Stress Other Own-Funds Change_{j}: Any other own-funds movement recognized under lapse scenario j.

Technical Rationale

Lapse risk tests which change in policyholder behaviour is most damaging for the book, because lapse can either remove future profit or lock in adverse obligations depending on product economics. The scenario-based structure is deliberate: different portfolios are vulnerable to different behaviour shocks, so the capital should follow the worst economic outcome rather than a generic average.

Important Notes

• Stress-ledger evidence gate: Stressed basic own funds must be backed by a full balance-sheet revaluation flag and model-run evidence flag. The capital result remains the visible loss in basic own funds, while the governance-breach output flags unsupported stress inputs for review. Use `underwriting-stressed-bof-loss-bridge` when the valuation delta needs to be inspected as its own atomistic calculator.
• The page selects the worst single lapse scenario; it does not aggregate the three scenario losses together.
• All three stress bridges should start from the same Basic Own Funds Before Stress amount. Mixing different base positions would make the max comparison meaningless.
• A scenario that improves own funds contributes zero to the final result because each scenario loss is floored at zero before the maximum is taken.
• Gross vs. Net SCR: This calculator determines the standalone Health SLT Lapse Risk SCR on the visible stressed basis. Even where the page already reflects direct own-funds or tax effects, 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.^[2]
• Reporting: The displayed result is intended to support the corresponding standard-formula component feeding the S.25.01.01 standard-formula reporting view.^[3]