Health SLT Lapse Risk Simplification

Overview

This calculator implements the simplified capital requirement for Health SLT Lapse Risk within the Solvency II standard formula.^[1] It combines Article 102 lapse-up and lapse-down approximations with the Article 102a grouped-policy mass-lapse simplification.

Input Terms

• Average Lapse Rate for Positive Surrender Strains (l up): The average lapse rate for health SLT contracts with positive surrender strains used in the lapse-up approximation.^[1]
• Average Run-Off Period for Positive Surrender Strains (n up): The average run-off period for the positive-strain group.^[1]
• Sum of Positive Surrender Strains (S up): The sum of positive surrender strains used to determine the health SLT lapse-up stress amount.^[1]
• Average Lapse Rate for Negative Surrender Strains (l down): The average lapse rate for health SLT contracts with negative surrender strains used in the lapse-down approximation.^[1]
• Average Run-Off Period for Negative Surrender Strains (n down): The average run-off period for the negative-strain group.^[1]
• Absolute Sum of Negative Surrender Strains (|S down|): The absolute value of negative surrender strains used to determine the health SLT lapse-down stress amount.^[1]
• Prepared Grouped Mass-Lapse Loss: The grouped-policy health SLT mass-lapse loss prepared by applying the Article 159 mass-lapse stress within the undertaking's valuation model, using the Article 102a grouping permission where eligible.^[2]

Technical Rationale

Article 102 provides simplified health SLT lapse-up and lapse-down formulas based on surrender strains, lapse rates, and run-off periods.^[1] Article 102a permits grouped-policy calculation for lapse-up, lapse-down, and mass-lapse requirements where the grouping conditions are met.^[2] This page keeps the published up/down formulas in the calculator and treats the grouped mass-lapse loss as a prepared valuation-model input instead of reconstructing basic own funds before and after the stress.

Important Notes

• Scenario selection: The simplified health SLT lapse capital requirement is the largest of the simplified lapse-up, lapse-down, and grouped mass-lapse results.^[1][2]
• Model boundary: The prepared grouped mass-lapse loss should already reflect the full valuation impact, including technical provisions, assets, recoverables, tax effects, and any relevant management actions. This calculator does not validate or recalculate that model output.
• Gross vs. Net SCR: This simplification estimates the standalone Health SLT Lapse Risk SCR. Solvency II risk is only finalized as a net impact on Basic Own Funds after diversification in the higher Health Risk aggregation path, then within BSCR, and after the top-level LAC TP and LAC DT adjustments.
• Regulatory deviation: Material deviation from the standard-formula assumptions or from the conditions supporting this simplification may support a capital add-on or a move toward a fuller or internal-model approach where justified.^[3]
• Reporting: The simplified result is intended to support the corresponding standard-formula component for the S.25.01.01 standard-formula reporting view, not to replace the full article-based result where the simplification is not justified.^[4]