Health SLT Expense Risk

Overview

This calculator implements the Health SLT Expense Risk sub-module within the undertaking's life-like (SLT) health underwriting risk framework.^[1] The requirement is defined as the economic capital necessary to maintain solvency following a sudden, permanent increase in future administration and claims-handling expenses.

Input Terms

• Future Administrative Expenses: The projected costs for managing the health contracts over their lifetime.
• Inflation Stress: The instantaneous 100 basis point increase in the expected inflation rate applied to future expenses.^[1]
• Expense Shock: The 10% instantaneous increase in the absolute level of future expenses.

Technical Rationale

The Health SLT Expense Risk capital requirement is calibrated to a 99.5% confidence level over a one-year horizon. It ensures the undertaking’s capital safety-net is sufficient to cover the erosion of own funds caused by higher-than-expected operational costs.

The calculation applies the prescribed shocks (10% increase in expenses + 1% permanent increase in inflation) to the Best Estimate Liability (BEL) cash flows. This ensures the undertaking’s technical provisions correctly reflect the potential for severe operational-cost escalation. The result feeds the Health SLT Risk and Health Risk Aggregation modules.

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.
• Gross vs. Net SCR: This calculator determines the standalone Health SLT Expense 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]