MCR

Overview

This calculator implements the Final Minimum Capital Requirement (MCR) within the Solvency II standard formula.^[1] The Final MCR is defined as the absolute minimum level of own funds an undertaking must hold, determined as the higher of the Combined MCR (a linear result corridor-tested between 25% and 45% of the SCR) and the Absolute Floor.^[2]

Input Terms

• Combined Minimum Capital Requirement: The MCR derived from the linear calculation after applying the 25% and 45% SCR corridor constraints.^[3]
• Minimum Capital Requirement Absolute Floor: The statutory minimum capital amount based on the undertaking's specific classification.^[1]

Technical Rationale

The Final MCR represents the final regulatory denominator used for the MCR adequacy ratio. The calculation selects the maximum of the Combined MCR and the absolute floor, ensuring that policyholder protection remains non-negotiable even in very low-risk portfolios.^[2]

A breach of this final MCR amount triggers the most severe supervisory intervention. The absolute-floor comparison provides a baseline for solvency, preventing the requirement from collapsing to levels that would be insufficient to support a minimum level of supervisory oversight. The final result acts as the ultimate capital threshold beneath which an insurer would no longer be considered viable for operation.

Important Notes

• MCR and SCR Distinction: This calculator determines the final minimum capital threshold. Insurers must demonstrate coverage of both the MCR and the SCR. A breach of the MCR triggers more immediate supervisory intervention than an SCR breach and may lead to withdrawal of authorisation.
• Binding Absolute Floor: When the absolute floor binds, the final MCR becomes insensitive to further reductions in the Linear MCR. At this point, the undertaking must hold capital sufficient to cover the statutory minimum regardless of its actual risk profile.
• Regulatory deviation: Material deviation from standard-formula assumptions at this layer may support a capital add-on or a move toward an internal model where justified.^[4]
• Reporting: The displayed result is intended to support the final MCR amount feeding S.25.01.01 context and the applicable S.28.01.01 or S.28.02.01 reporting view.^[5][6][7]