Article 95 Simplified calculation of the capital requirement for permanent changes in lapse rates

1. Where Article 88 is complied with, insurance and reinsurance undertakings may calculate the capital requirement for the risk of a permanent increase in lapse rates as follows:

Lapse_up = 0,5 • l_up • n_up • S_up

where:

(a) l_up denotes the higher of the average lapse rate of the policies with positive surrender strains and 67 %;

(b) n_up denotes the average period in years over which the policies with a positive surrender strains run off;

(c) S_up denotes the sum of positive surrender strains.

2. Where Article 88 is complied with, insurance and reinsurance undertakings may calculate the capital requirement for the risk of a permanent decrease in lapse rates as follows:

Lapse_down = 0,5 • l_down • n_down • S_down

where:

(a) l_down denotes the higher of the average lapse rate of the policies with negative surrender strains and 40 %;

(b) n_down denotes the average period in years over which the policies with a negative surrender strains runs off;

(c) S_down denotes the sum of negative su

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