Combined MCR

Overview

This calculator implements the Combined Minimum Capital Requirement (MCR) within the Solvency II standard formula.^[1] The Combined MCR is an intermediate regulatory result produced by corridor-clipping the Linear MCR to a band of 25% to 45% of the Solvency Capital Requirement.^[2]

Input Terms

• Linear MCR: The minimum capital requirement derived from the linear volume-measure formulas before corridor constraints are applied.^[3]
• Solvency Capital Requirement (SCR): The final SCR used to determine the lower (25%) and upper (45%) bounds of the MCR corridor.

Technical Rationale

The Combined MCR is an intermediate regulatory step that ensures the minimum capital requirement remains proportionate to the SCR while preventing it from becoming detached from the undertaking's overall solvency profile.^[2]

The calculation applies a corridor to the Linear MCR, ensuring it is at least 25% but no more than 45% of the final SCR. This structure provides a credible supervisory intervention point: a breach of the MCR signals a more critical depletion of capital than an SCR breach, justifying more immediate and severe regulatory action.

Important Notes

• MCR Chain: This calculator produces the Combined MCR as an intermediate result. The final minimum capital threshold is not established until this figure is compared against the Absolute Floor in the Final MCR calculation.
• Corridor Binding Logic: A binding 25% floor indicates the Linear MCR is exceptionally low relative to the SCR, while a binding 45% ceiling indicates a relatively high volume of business relative to the total diversified SCR. Both boundaries ensure the MCR stays within a prescribed range of the primary capital requirement.
• Absolute Floor Step: This result does not yet incorporate the statutory absolute floor. If the Combined MCR is lower than the absolute minimum for the insurer type, the final requirement will be adjusted upward in the Final MCR comparison.^[4]
• 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.^[5]
• Reporting: The displayed result is intended to support the corresponding MCR component feeding S.25.01.01 context and the applicable S.28.01.01 or S.28.02.01 reporting view.^[6][7][8]