Linear MCR

Overview

This calculator implements the Linear Minimum Capital Requirement (MCR) within the Solvency II standard formula.^[1] The Linear MCR is a volume-based component calculated as a weighted sum of technical provisions and written premiums or capital at risk, reflecting the undertaking's business scale before the SCR corridor constraints are applied in the Combined MCR step.^[2]

Input Terms

• Linear MCR (Non-Life): The weighted sum of technical provisions and written premiums for non-life business.^[3]
• Linear MCR (Life): The weighted sum of technical provisions and capital at risk for life business.^[4]

Technical Rationale

Article 129 requires an absolute floor for capital adequacy that remains tied to the undertaking's current business volume and obligations before the final MCR corridor and floor constraints are applied.

The prescribed factors turn core business-volume measures into a stable supervisory floor. That makes the Linear MCR less risk-sensitive than the SCR but still tied to the scale of current obligations and premiums, which is the point of an early and more severe intervention threshold.^[1]

The final Linear MCR is constrained through the Combined MCR corridor against the final SCR before the absolute floor is considered.

Important Notes

• Two-Step MCR Structure: The Linear MCR is corridor-clipped to a band of 25% to 45% of the Solvency Capital Requirement (SCR), producing the Combined MCR. The Combined MCR is then compared against the MCR Absolute Floor to produce the Final MCR, which is the operative supervisory threshold.^[2]
• Linear Approximation: The MCR is intended to be a simple, proxy-based measure of capital adequacy, providing a more stable and less risk-sensitive floor than the SCR.
• 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 for the applicable S.28.01.01 or S.28.02.01 reporting view.^[6][7]