General Insurance glossary
What is a SCR (Solvency Capital Requirement)?
Under Solvency II, the capital an insurer must hold to ensure solvency at a 99.5% confidence level over one year.
Definition
SCR (Solvency Capital Requirement)
Under Solvency II, the capital an insurer must hold to ensure solvency at a 99.5% confidence level over one year.
Example
How it works in practice
A European insurer calculates that its SCR is EUR 800 million, meaning it needs to hold at least that amount of eligible capital to withstand a 1-in-200-year loss event. Its available capital is EUR 1.1 billion, giving it a solvency coverage ratio of 137.5%. If a severe hurricane reduces its capital below the SCR threshold, the regulator can restrict dividend payments and require a capital restoration plan.
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