SCR Ratio

Overview

This calculator implements the capital adequacy ratio (Solvency Ratio) for the Solvency Capital Requirement (SCR) within the Solvency II standard formula.^[1] The SCR Ratio is defined as the eligible own funds available to cover the loss in basic own funds resulting from a 1-in-200 year stress event.^[1]

Input Terms

• Eligible Own Funds for SCR: The total of Tier 1, Tier 2, and Tier 3 own-funds items eligible to cover the Solvency Capital Requirement.^[2]
• Solvency Capital Requirement (SCR): The total capital requirement to cover all quantifiable risks, after diversification and loss-absorbing adjustments.^[1]

Technical Rationale

The SCR Ratio is calibrated to a 99.5% confidence level over a one-year horizon. It represents the primary measure of an undertaking's capital adequacy and resilience against adverse events. The ratio provides a transparent indicator of the capital headroom available to the insurer beyond its legal requirements.^[1]

The calculation is the quotient of Eligible Own Funds over the SCR. A ratio above 100% indicates that the undertaking’s own funds are sufficient to cover its risk profile under the prescribed 1-in-200 year stress event. As the ratio approaches the 100% threshold, it becomes a signal for increased supervisory monitoring and potential recovery planning.

Important Notes

• Gross vs. Net SCR: This calculator determines the final Solvency Ratio. While it is the ultimate measure of capital adequacy, the ratio is only as reliable as the underlying valuation, tiering, and risk-aggregation logic feeding the numerator and denominator.
• Coverage Headroom: The ratio should be interpreted together with the absolute capital amounts. A high ratio in a small undertaking may provide less absolute protection than a lower ratio in a larger, highly diversified undertaking.
• Reporting: The SCR Ratio is a core capital-coverage indicator feeding the S.23.01.01 and S.25.01.01 reporting views.^[3][4]
• Regulatory deviation: Material deviation from the standard formula assumptions used in this ratio may lead to a higher actual risk profile than the calculated coverage suggests.^[5]