Prudential Regulation Authority Rulebook

1.

A firm must calculate the capital requirement for income protection disability-morbidity risk as equal to the loss in its basic own funds that would result from the following combination of instantaneous permanent changes:

1. (1) an increase of 35% in the disability and morbidity rates that are used in the calculation of technical provisions to reflect the disability and morbidity in the following 12 months;
2. (2) an increase of 25% in the disability and morbidity rates that are used in the calculation of technical provisions to reflect the disability and morbidity in the years after the following 12 months;
3. (3) where the disability and morbidity recovery rates used in the calculation of technical provisions are lower than 50%, a decrease of 20% in those rates; and
4. (4) where the disability and morbidity persistency rates used in the calculation of technical provisions are equal to or lower than 50%, an increase of 20% in those rates.