Final MCR

Overview

This calculator implements the final minimum-capital decision step.^[1][2] It compares the Combined Minimum Capital Requirement with the Minimum Capital Requirement Absolute Floor and returns the higher amount as the final regulatory denominator for MCR coverage.^[2]

Use it once the corridor-constrained combined MCR and the statutory floor have both been prepared.

Input Terms

• Combined Minimum Capital Requirement: Combined MCR before the final absolute-floor comparison.
• Minimum Capital Requirement Absolute Floor: Statutory floor determined by insurer type.

Calculation

The route performs a single maximum test.

• Start from the Combined Minimum Capital Requirement produced by the corridor step.
• Compare it with the Minimum Capital Requirement Absolute Floor.
• Final Minimum Capital Requirement: = `max(Combined Minimum Capital Requirement, Minimum Capital Requirement Absolute Floor)`.^[2]

Important Notes

• The absolute floor only binds when the corridor-constrained combined MCR is too low. When it does bind, the final MCR stops responding to smaller changes in the linear MCR.
• This is the denominator used by the MCR coverage ratio. Using Combined MCR instead would understate the legal minimum whenever the floor is active.
• Review which side of the maximum is binding before interpreting movements in the final result.