Life Mortality Risk

Overview

This calculator implements the gross capital requirement for the Life Mortality Risk sub-module within the Solvency II standard formula.^[1] The Life Mortality Risk requirement is defined as the economic capital necessary to cover the loss in basic own funds resulting from a 1-in-200 year stress event affecting mortality rates, representing a permanent 15% increase for each relevant age.^[2]

Input Terms

• Basic Own Funds (Pre-Stress): The undertaking's basic own funds before the application of the mortality shock.
• Scenario Shock (Assets/Liabilities): The instantaneous change in the value of assets and technical provisions resulting from the 15% mortality increase.^[1]
• LAC TP / LAC DT (Scenario-Specific): The reduction in the gross scenario loss provided by the loss-absorbing capacity of technical provisions and deferred taxes.

Technical Rationale

The Life Mortality 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 an adverse increase in death rates for policies where a higher mortality experience is a risk driver (e.g., term assurance or whole-of-life protection).^[1]

The calculation follows a stressed-own-funds approach, measuring the capital requirement as the reduction in net asset value (NAV) after the 15% shock is applied across the entire life portfolio. This method ensures that the requirement reflects the real economic loss after claims, reserves, and potential tax offsets have all reacted to the change in mortality assumptions. The final result represents the gross mortality underwriting component before diversification in Life Risk.

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.
• Scenario Binding Logic: Only policies that are sensitive to a mortality increase (where death is the insured event) are included in the shock. Policies with a longevity sensitivity (e.g., annuities) are excluded from this sub-module and managed under Longevity Risk.^[1]
• Gross vs. Net SCR: This calculator determines the standalone Life Mortality 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 Life Risk, 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]