Prudential Regulation Authority Rulebook

1.

The SLT health underwriting risk sub-module must consist of all of the following sub-modules:

1. (1) the health mortality risk sub-module;
2. (2) the health longevity risk sub-module;
3. (3) the health disability-morbidity risk sub-module;
4. (4) the health expense risk sub-module;
5. (5) the health revision risk sub-module; and
6. (6) the SLT health lapse risk sub-module.

2.

A firm must calculate the capital requirement for SLT health underwriting risk in accordance with the following formula:

$${SCR}_{SLTh}=\sqrt{\sum {}_{i,j}{CorrSLTH}_{(i,j)}\cdot {SCR}_i\cdot {SCR}_j}$$

where:

1. (1) the sum denotes all possible combinations (i, j) of the sub-modules set out in 3C8.1;
2. (2) CorrSLTH_{(i, j)} denotes the correlation coefficient for SLT health underwriting risk for sub-modules i and j; and
3. (3) SCR_i and SCR_j denote the capital requirements for risk sub-modules i and j respectively.

3.

The correlation coefficient CorrSLTH_{(i, j)} referred to in 3C8.2 must be equal to the value set out in row i and in column j of the following correlation matrix:

	Health mortality	Health longevity	Health disability-morbidity	Health expense	Health revision	SLT health lapse
Health mortality	1	-0.25	0.25	0.25	0	0
Health longevity	-0.25	1	0	0.25	0.25	0.25
Health disability-morbidity	0.25	0	1	0.5	0	0
Health expense	0.25	0.25	0.5	1	0.5	0.5
Health revision	0	0.25	0	0.5	1	0
SLT health lapse	0	0.25	0	0.5	0	1