Health NSLT Lapse Risk

Overview

This calculator implements the gross capital requirement for the Health NSLT Lapse Risk sub-module within the Solvency II standard formula.^[1] The Health NSLT Lapse 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 policyholder termination or lapse behavior for obligations managed using non-life techniques.^[2]

Input Terms

• Mass-Lapse Scenario: The capital requirement for a sudden, mass-termination event affecting 40% of the health NSLT portfolio.^[1]
• NAV Base / NAV Shock: The net asset values used to determine the change in basic own funds under the mass-lapse scenario.

Technical Rationale

The Health NSLT Lapse 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 a sudden and extreme increase in policyholder terminations for health obligations that do not use life-actuarial techniques (NSLT).^[1]

Unlike the life-lapse module, which tests several scenarios (up/down/mass), the health NSLT module primarily focuses on the Mass-Lapse scenario, requiring that the undertaking holds enough capital to absorb the loss of 40% of its business volume. This ensures resilience even in situations where a large portion of the customer base terminates their policies simultaneously. The final result represents the gross health lapse component before diversification in Health 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: If the undertaking gains from higher lapse rates (e.g., due to profitable commissions being clawed back or unearned premium reserves being released), the capital charge for this module is floored at zero.
• Gross vs. Net SCR: This calculator determines the standalone Health NSLT 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.^[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]