Event stressEvent stress

Event stress

35. The ‘event stress’ allows for the impact of single events that could commence in the 12 months following the reporting date and cause multiple claims. These events could include pandemics, terrorist attacks and natural catastrophes and may affect either or both mortality and morbidity experience. The Appointed Actuary must determine an appropriate event stress that provides a 99.5 per cent probability of sufficiency with respect to single events that could potentially commence over the following 12 months.
36. The event stress, before adjustment for diversification, must at a minimum include a pandemic scenario with the following impacts on mortality and morbidity claims experience:
(a) annual mortality rates at each age increase by 0.5 per thousand for the two years following the reporting date;
(b) an annual incidence rate of total disablement at each age, as a result of the event, of 10 per cent of lives insured for the two years following the reporting date;
(c) of those lives becoming disabled as a result of the event, half remain disabled after 14 days, one quarter remain disabled after 30 days and none remain disabled after 60 days; and
(d) if disability continues to the end of the policy waiting period, one month’s benefit will be paid. For waiting periods other than zero, 14, 30 or 60 days, interpolation must be used to find the proportion of policies for which a benefit will be paid.
37. The pandemic scenario may be assumed to reduce the stressed policy liabilities for policies subject to longevity risk. However the outcome of applying the pandemic scenario must not result in stressed policy liabilities being less than adjusted policy liabilities for any of the product groups defined in paragraph 16.