LapsesLapses

Lapses

46. The stress margin for lapses[\[4\]](#_ftn4) must be determined by the Appointed Actuary, having regard to the nature of the company’s lapse risks. The stress must be determined so that the Insurance Risk Charge for the statutory fund has a 99.5 per cent probability of sufficiency over a 12 month period. The lapse stress may allow for correlations with other insurance stresses, with the exception of servicing expenses. The lapse stress may vary for different types of policy. A decision as to whether to increase or reduce lapse rates must be made for each type of policy depending on whether an increase or reduction would increase the stressed policy liabilities.