Where Article 88 is complied with, insurance and reinsurance undertakings may calculate the capital requirement for medical expense disability-morbidity risk as follows:

where:

(a) MP denotes the amount of medical payments during the last year on medical expense insurance or reinsurance obligations during the last year;

(b) n denotes the modified duration in years of the cash flows included in the best estimate of those obligations;

(c) i denotes the average rate of inflation on medical payments included in the calculation of the best estimate of those obligations, where the weights are based on the present value of medical payments included in the calculation of the best estimate of those obligations.