Risk Capital Margin Resilience Tests IPSB

Home >Integrated Prudential Sourcebook > Twin Peaks Approach > Realistic Peak > Risk Capital Margin >

The RCM comprise of a series of stress tests which have been introduced to allow for the risk that the with-profits liabilities and bonus may be greater than expected. These stress tests are applied to the Realistic Liabilities.

The Risk Capital Margin Stress Tests are

Equities RCM

For UK equities fall of at least 10%,

Or if greater, the lower of:

1. A percentage fall in the market value of equities which would produce an earnings yield of the FTSE Actuaries All Share Index equal to 4/3 of the long-term gilt yield

2. 25% less any percentage reduction between the current FTSE Actuaries All Share Index and its average over the last 90 days

Broadly equivalent test for overseas equities

Interest rate

The more onerous of a fall or rise in yields on all fixed interest securities by a percentage point amount equal to 20%of the long term gilt yield (or comparable foreign government bond yield for foreign bonds)

Real estate

A fall in real estate values of a minimum of 10% and a maximum of 20%; the required fall increases as the ratio of the current value of an appropriate realstate index to the average value of that index over the three preceding financial years increases.

Go back to the ..
Risk Capital Margin
section page.

- -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

To return to the main index press home at the bottom of the page.

-

Home Page