MCR Ratio

Overview

This calculator implements the MCR Ratio within the undertaking's capital-adequacy monitoring framework.^[1] The ratio is defined as the measure of the undertaking's eligible basic own funds relative to the Minimum Capital Requirement (MCR).

Input Terms

• Eligible Basic Own Funds (MCR): The amount of Tier 1 and Tier 2 capital available to cover the MCR.^[2]
• Minimum Capital Requirement (MCR): The absolute minimum level of capital below which the undertaking's license would be withdrawn.

Technical Rationale

The MCR Ratio is a fundamental component of the undertaking’s financial-strength monitoring. It ensures the undertaking’s absolute minimum safety-net is correctly quantified and that the undertaking is not operating below the ultimate regulatory red-line.

The calculation divides the eligible basic own funds by the total MCR. This ensures that the undertaking can identify potential mission-critical capital shortfalls. A ratio below 100% triggers immediate supervisory intervention and the withdrawal of the insurance-license. The result feeds the Solvency Ratio Summary and S.28.01.01/S.28.02.01 views.

Important Notes

• MCR and SCR Distinction: This calculator monitors the minimum capital threshold. A ratio below 100% triggers immediate supervisory intervention and may lead to withdrawal of authorisation. Insurers must also separately demonstrate SCR coverage, which is governed by a distinct calculation and a different set of eligible own funds.
• 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.^[3]
• Reporting: The displayed result is the canonical MCR-coverage indicator feeding S.23.01.01 own funds and the applicable S.28.01.01 or S.28.02.01 MCR template.^[4][5][6]