Prudential Regulation Authority Rulebook

3.1

The function used to calculate the firm’s MCR must be calibrated to the value-at-risk of its basic own funds subject to a confidence level of 85% over a one-year period.

[Note: Art. 129(1)(c) of the Solvency II Directive]

3.2

The MCR must have an absolute floor of:

1. (1) 2,500,000 euro for firms, including captive insurers, which have Part 4A permission to effect contracts of insurance or carry out contracts of insurance that are contracts of general insurance, except in the case where all or some of the general insurance business classes 10 to 15 are covered, in which case it must be no less than 3,700,000 euro;
2. (2) 3,700,000 euro for firms, including captive insurers, which have Part 4A permission to effect contracts of insurance or carry out contracts of insurance that are contracts of long term insurance;
3. (3) 3,600,000 euro for pure reinsurers, except in the case of captive reinsurers that are pure reinsurers, in which case the MCR must be no less than 1,200,000 euro; or
4. (4) the sum of the amounts set out in (1) and (2) for firms other than pure reinsurers which as of 15 March 1979 carried on both long-term insurance business and general insurance business.

[Note: Art. 129(1)(d) of the Solvency II Directive]

3.3

Without prejudice to the requirements on the absolute floor in 3.2, the MCR must neither fall below 25% nor exceed 45% of the firm’s SCR, calculated in accordance with SCR Rules, and including any capital add-on which has been imposed.

[Note: Art. 129(3) of the Solvency II Directive]