MCR Life Linear Component

Overview

This calculator implements the Life Linear Component of the Minimum Capital Requirement (MCR) within the Solvency II standard formula.^[1] The Life Linear MCR is defined as the base capital requirement derived directly from the undertaking's life technical provisions and capital at risk before any floor or cap constraints are applied.^[2]

Input Terms

• Technical Provisions (Net of Reinsurance): The value of life technical provisions calculated net of expected reinsurance recoverables.^[1]
• Net Amount at Risk (NAR): The total net amount at risk for life-benefit obligations, net of reinsurance.
• Line-of-Business (LoB) Factors: The regulatory factors (e.g., 0.07% to 3.7%) applied to the volume of each life insurance segment.

Technical Rationale

The Life Linear MCR is a volume-based measure of capital adequacy. It ensures that the absolute minimum capital floor for life business scales linearly with the undertaking's reported obligations and biometric risk exposure.^[1]

The calculation sums the product of the prescribed factors and the corresponding technical provisions/amount at risk for each of the major life insurance segments (e.g., with-profit, unit-linked, other life). This ensures that the undertaking’s MCR correctly reflects its specific business mix and tail-risk exposure. The final result represents the life contribution to the total Linear MCR.

Important Notes

• Combined MCR: The life linear component is added to the non-life linear component to determine the total Linear MCR, which is then used in the Combined MCR calculation.
• Reporting: The displayed result is intended to support the corresponding standard-formula component feeding the S.28.01 standard-formula reporting view.^[3]