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Life Expense Risk

AdvancedRequires external valuation

Calculate the Stressed Annual Expenses and Stressed Expense Inflation Rate instantly.

€
%
%
%

Current Annual Expenses

€10 000 000

×

Expense Stress Multiplier

110.0%

=

Stressed Annual Expenses

€11 000 000

Current Expense Inflation Rate

2.0%

+

Inflation Increase

1.0%

=

Stressed Expense Inflation Rate

3.0%

Annual Expense Shock Impact

Shock increase
Base value
ModuleShockPre-shockPost-shockCharge
Annual Expenses+10%€10 000 000€11 000 000€1 000 000

Expense Inflation Shock Impact

Shock increase
Base value
ModuleShockPre-shockPost-shockCharge
Expense Inflation Rate+1%2.0%3.0%1.0%
1Step 1

Stressed Annual Expenses

Stressed Annual Expenses=Current Annual Expenses×(1+Expense Increase)\mathrm{Stressed\ Annual\ Expenses}=\mathrm{Current\ Annual\ Expenses}\times(1+\mathrm{Expense\ Increase})
2Step 2

Stressed Expense Inflation Rate

Stressed Expense Inflation Rate=Current Expense Inflation Rate+Inflation Increase\mathrm{Stressed\ Expense\ Inflation\ Rate}=\mathrm{Current\ Expense\ Inflation\ Rate}+\mathrm{Inflation\ Increase}

Understand the Life Expense Risk

Overview

Article 140 defines the Life Expense Risk stresses for expense levels and expense inflation embedded in technical provisions.[1]

Input Terms

  • Current Annual Expenses: Representative amount of expenses taken into account in technical provisions.[1]
  • Current Expense Inflation Rate: Representative expense inflation assumption used in technical provisions.[1]

Technical Rationale

Article 140 captures the risk that the expenses embedded in technical provisions are too low for the future servicing burden.[1] The level component reflects immediate expense strain, while the inflation component reflects compounding cost pressure over the remaining obligation term.

The two stressed assumptions affect different parts of the valuation model: current expense cashflows and future expense escalation. The final Life Expense Risk capital amount depends on the duration and expense profile of the obligations.

Important Notes

  • This page specifies the stresses, not the final standalone Life Expense Risk SCR.
  • With regard to reinsurance obligations, apply the stress to the undertaking's own expenses and, where relevant, expenses of ceding undertakings.

Sources

  1. Delegated Regulation (EU) 2015/35 - Art. 140 (Life-expense risk sub-module) - EIOPA

Default values are illustrative sample inputs for navigation, training, and QA. Replace them with controlled data before using the result in capital analysis, governance, or reporting decisions.