Category: Capacity and rating · Reviewed by Simon Temme, Account Executive · Last reviewed 2026-06-05
The Minimum Capital Requirement (MCR) is the absolute floor of capital under Solvency II, calculated as a function of the Solvency Capital Requirement (typically 25–45 per cent) subject to absolute floors and ceilings by class of business. Breaching the MCR triggers immediate regulatory intervention.
Category: Capacity and rating Also known as: Minimum Capital Requirement, MCR Related concepts: Solvency II SCR, solvency ratio
The MCR is calculated under a linear formula that produces a result between 25 per cent and 45 per cent of the SCR, subject to absolute monetary floors (€4m for non-life insurers, with higher floors for more complex insurers, and a sufficiently high MCR for reinsurers and Lloyd’s). The intention is that the MCR represents the lowest level of capital at which policyholder protection remains acceptable.
Insurers breaching the SCR but holding capital above the MCR must submit a recovery plan to the PRA within two months and restore capital within six months. Insurers breaching the MCR must submit a finance scheme within one month and restore capital within three months, with the PRA exercising its powers of intervention up to and including withdrawal of authorisation.
The MCR is set out in Articles 128 to 131 of the Solvency II Directive 2009/138/EC [1] and the Commission Delegated Regulation. UK implementation is through the PRA Insurance Rulebook.
The MCR is rarely a binding constraint for well-capitalised insurers, which typically operate at solvency ratios of 150–250 per cent of SCR (i.e. 400–800 per cent of MCR). The MCR is, however, the key trigger for regulatory intervention in distressed insurers — beyond which the PRA may direct the insurer to cease writing new business, sell assets or transfer policy portfolios.
An illustrative example: an insurer with an SCR of £150m has an MCR of (illustrative) £55m. The insurer holds eligible own funds of £200m, producing a solvency ratio of 133 per cent and an MCR coverage ratio of 364 per cent — comfortably above both regulatory thresholds. Were eligible own funds to fall below £55m, the insurer would breach the MCR and trigger immediate PRA intervention.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
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