The Solvency Capital Requirement is the capital an EU insurer must hold under Solvency II to absorb a 1-in-200-year loss over one year (99.5 percent value at risk). It is calculated with the standard formula or an approved internal model. The lower Minimum Capital Requirement (MCR) triggers the strongest supervisory action.
Solvency IISolvency II is the EU prudential regime for insurers and reinsurers, applied since 1 January 2016. It has three pillars: market-consistent valuation and risk-based capital (SCR and MCR), governance including the ORSA, and supervisory reporting and public disclosure.
Technical provisionsTechnical provisions are the value of an insurer's obligations to policyholders under Solvency II, equal to a best estimate of discounted future cash flows plus a risk margin. They correspond to the amount another insurer would require to take over the obligations.
ORSA (Own Risk and Solvency Assessment)The Own Risk and Solvency Assessment is an insurer's own forward-looking review of its risks, capital needs and solvency position against its business plan, required by Article 45 of Solvency II. It is run at least yearly, approved by the board and reported to the supervisor.
Solvency IISolvency II is the EU prudential regime for insurers and reinsurers, applied since 1 January 2016. It has three pillars: market-consistent valuation and risk-based capital (SCR and MCR), governance including the ORSA, and supervisory reporting and public disclosure.
Value at risk (VaR)Value at risk estimates the loss a portfolio should not exceed over a given horizon at a given confidence level, for example 99 percent over one day. Common methods are historical simulation, parametric (variance-covariance) and Monte Carlo. It says nothing about the size of losses beyond the threshold.