Reviewed by Apex Insurance Brokers · Last reviewed 2026-06-22
Reviewed by Apex Insurance Brokers · Last reviewed 2026-06-22
Reviewed by Apex Insurance Brokers · Last reviewed 2026-06-22
~2 min read
Reviewed by Apex Insurance Brokers · Last reviewed 2026-06-22
Category: Capital management · Reviewed by Al Jabbar, Broker · Specialist Risks · Last reviewed
In short: The Minimum Capital Requirement (MCR) under Solvency II is a hard supervisory floor below which authorisation is withdrawn. It is calibrated to a Value at Risk at the 85% confidence level over one year — substantially less prudent than the SCR’s 99.5%, but designed as the point of no return for supervisory intervention.
Calculation
The MCR is a linear function of premium and technical provisions, calibrated by line of business, subject to floors and corridor constraints:
Floor — 25% of the SCR.
Cap — 45% of the SCR.
Absolute minimum (AMCR) — varies by undertaking type (e.g. €2.5m for non-life insurers, €3.7m for life insurers, €3.6m for reinsurers under Article 129).
Coverage requirements
The MCR may only be covered by Tier 1 and Tier 2 basic own funds, with at least 80% Tier 1. Tier 3 capital cannot count toward the MCR.
Consequences of breach
If an insurer breaches the MCR:
A short-term finance scheme must be submitted to the supervisor within 1 month.
The scheme must restore the MCR within 3 months.
Failure leads to withdrawal of authorisation.
By contrast, an SCR breach allows a 6-month recovery plan and 9 months total to restore coverage.
References
Solvency II Directive 2009/138/EC, Articles 128–131.
Delegated Regulation 2015/35, Articles 248–253.
PRA Insurance Rulebook, Minimum Capital Requirement.
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