ERM Frameworks and Responses to risk [59]

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Bullet points include: Two capital requirements Solvency Capital Requirement (SCR) – based on one year 99.5% VaR Minimum Capital Requirement (MCR) – lower figure which if breached may trigger de-authorisation, targeted at approx. one year 80-90% VaR Standard Formula SCR designed to be adequate for (smaller) insurers Larger / more sophisticated firms can employ internal models Need to be authorised by supervisors. Full or partial MCR more formulaic (if not using internal model), but constrained by a band derived from SCR

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