Under the standard formula method is there a prescription on the stresses that are to be done? In the notes they mention 2 briefly. Thanks
I dont think there is need to worry too much about the exact stresses as these are subject to change. I could be wrong but what is in the notes are probably examples of what was prescribed stresses for QIS5 but the as these are from a few years ago they are subject to change. The stresses are similar types of stress to the current RCR/RCM stresses and are as you would expect: Mortality - increase in mortality (mainly affects protection business) longevity - decrease in mortality (mainly affects annuity business) disability/morbidity - increase in disability (mainly pols with sickness benefits) lapse - change in lapses (increase or decrease) Expense - increase in expenses (+ inflation) catastrophe - increase in people dying over the coming year revision - increase in amount payable each year
Yes, the prescribed stresses will still be to 99.5% VaR measure. However, as these are standard formulae, they usually involve linear formulae of proportion of technical provisions and also earned premiums either at beginning and/or end of a year.
