Capital requirement for medical expense disability-morbidity risk

1. The capital requirement for medical expense disability-morbidity risk shall be equal to the larger of the following capital requirements:

(a) the capital requirement for the increase of medical payments;

(b) the capital requirement for the decrease of medical payments.

2. The capital requirement for the increase of medical payments shall be equal to the loss in basic own funds of insurance and reinsurance undertakings that would result from the following combination of instantaneous permanent changes:

(a) an increase of 5 % in the amount of medical payments taken into account in the calculation of technical provisions;

(b) an increase by 1 percentage point to the inflation rate of medical payments (expressed as a percentage) used for the calculation of technical provisions.

3. The capital requirement for the decrease of medical payments shall be equal to the loss in basic own funds of insurance and reinsurance undertakings that would result from the following combination of instantaneous permanent changes:

(a) a decrease of 5 % in the amount of medical payments taken into account in the calculation of technical provisions;

(b) a decrease by 1 percentage point from the inflation rate of medical payments (expressed as a percentage) used for the calculation of technical provisions.