1
Application and Definitions
1.1
Unless otherwise stated, this Part applies to:
- (1) a UK Solvency II firm; and
- (2) in accordance with Insurance General Application 3, the Society, as modified by 5.
- 01/01/2016
- Legal Instruments that change this rule 1.1
1.2
The changes to this rule are effective from 23:00 on 31/12/2020.
In this Part, the following definitions shall apply;
means a UK Solvency II firm owned by:
- (1) a financial undertaking other than a UK Solvency II firm; or
- (2) a group of UK Solvency II firms; or
- (3) a non-financial undertaking;
the purpose of which is to provide insurance cover exclusively for the risks of the undertaking or undertakings to which it belongs, or of an undertaking, or undertakings, of the group of which that UK Solvency II firm is a member.
[Note: Art. 13(2) of the Solvency II Directive]
means a UK Solvency II firm that is a pure reinsurer owned by:
- (1) a financial undertaking other than a UK Solvency II firm; or
- (2) a group of UK Solvency II firms; or
- (3) a non-financial undertaking;
the purpose of which is to provide reinsurance cover exclusively for the risks of the undertaking or undertakings to which it belongs or of an undertaking or undertakings of the group of which that pure reinsurer is a member.
[Note: Art.13(5) of the Solvency II Directive]
Export chapter as
2
General Provisions
2.1
A firm must hold eligible own funds covering the MCR.
[Note: Art. 128 of the Solvency II Directive]
- 01/01/2016
- Legal Instruments that change this rule 2.1
3
Calculation of the Minimum Capital Requirement
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]
- 01/01/2016
- Legal Instruments that change this rule 3.1
3.2
The MCR must have an absolute floor of:
- (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) 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) 3,600,000 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) 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]
- 01/01/2016
- Legal Instruments that change this rule 3.2
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]
- 01/01/2016
- Legal Instruments that change this rule 3.3
4
Frequency and Reporting in Relation to the Minimum Capital Requirement
4.1
A firm must calculate the MCR at least quarterly and report the results of that calculation to the PRA in accordance with the requirements laid down in Reporting 2.1 to 2.5.
[Note: Art. 129(4) of the Solvency II Directive]
4.2
- 01/01/2016
- Legal Instruments that change this rule 4.2
5
Lloyd’s
5.1
This Chapter applies to the Society.
- 01/01/2016
- Legal Instruments that change this rule 5.1
5.2
In calculating the MCR for Lloyd’s, in the manner required by 3, the Society must ensure that the MCR is calibrated so as to include all quantifiable risks to which:
- (1) members are exposed as a consequence of those members carrying on insurance business at Lloyd’s; and
- (2) the Society is exposed, including risks to the central assets and central liabilities.
- 01/01/2016
- Legal Instruments that change this rule 5.2
5.3
- 01/01/2016
- Legal Instruments that change this rule 5.3
5.4
The Society must calculate a reporting point for each underwriting member, in accordance with 5.5.
- 01/01/2016
- Legal Instruments that change this rule 5.4
5.5
The reporting point for each underwriting member must be calculated using the ratio referred to in 5.3, expressed as a percentage of the member’s notional SCR referred to in Solvency Capital Requirement – General Provisions 8.4.
- 01/01/2016
- Legal Instruments that change this rule 5.5
5.6
- 01/01/2016
- Legal Instruments that change this rule 5.6