RBS 2008 Annual Report Download - page 118

117RBS Group Annual Report and Accounts 2008
The key factors that increase the frequency of claims include epidemics or widespread changes in lifestyle.
The Group uses base tables of standard mortality appropriate to the type of contract being written and the territory in which the insured person
resides. These are adjusted to reflect the Group’s experience and expectations for future mortality improvements as appropriate.
Sensitivity factor Description of sensitivity factor applied
Interest rate and investment return Change in market interest rates of ±1%
The test allows consistently for similar changes to investment returns
and movements in the market value of backing fixed interest securities
Expenses Increase in maintenance expenses of 10%
Assurance mortality/morbidity Increase in mortality/morbidity rates for assurance contracts of 5%
Annuitant mortality Reduction in mortality rates for annuity contracts of 5%
The above UK sensitivity factors are applied through actuarial and statistical models, with the following impact on the financial statements.
Impact on profit and equity
2008 2007
Risk factor Variability £m £m
Interest rates +1% (11) (18)
Interest rates –1% 11 15
Expenses +10% (7) (5)
Assurance mortality/morbidity +5% (9) (8)
Annuitant mortality –5% — —
Reinsurance
The Group uses various types of reinsurance to transfer risk that is outside the Group`s risk appetite, including:
•Per individual risk excess of loss reinsurance.
•Catastrophe excess of loss reinsurance.
•Quota share and surplus reinsurance.