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SCHEDULE 4. Calculation of Minimum Capital Requirement (MCR)
FINANCIAL SERVICES LEGISLATION
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INSURANCE AND REINSURANCE PRUDENTIAL RULES
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SCHEDULE 4. Calculation of Minimum Capital Requirement (MCR)

1. Minimum capital requirement (MCR)

1.1. The Capital Floor

(1) An AIFC-Incorporated Insurer must maintain a paid up share capital of not less than the Capital Floor, or an equivalent sum in any currency acceptable to the AFSA.

(2) An AIFC-Incorporated Insurer must maintain minimum shareholders’ funds of at least 75% of the Capital Floor or an equivalent sum in any currency acceptable to the AFSA.

(3) The Capital Floor is:

1.2. The MCR for General Insurance Business

(1) The MCR for an AIFC-Incorporated Insurer carrying on General Insurance Business is an amount not less than the higher of:

  • (a) 12% of that Insurer’s gross written premiums during the previous financial year, net of:
  • (i) the amount of any premium taxes, rebates, refunds, and commissions accrued by the Insurer, and
  • (ii) the gross amount of any reinsurance premiums (after deduction of any rebates or commissions receivable by the Insurer) ceded by the Insurer in respect of General Insurance Business during that preceding financial year;
  • (b) 12% of the value of claims reserves and premium reserves, net of reinsurance and amounts reserved to maximum; and
  • (c) the Capital Floor applicable to that Insurer.

(2) For the purposes of rule 1.2(1)(a) any funds received by an Insurer in return for the assumption of insurance obligations under a novation, portfolio transfer or other scheme or arrangement must be included in the gross written premium income computation at a value:

  • (a) determined on a basis acceptable to the AFSA; and
  • (b) supported by an actuarial opinion acceptable to the AFSA.

(3) Reinsurance ceded by an Insurer to an Associated Party shall not be taken into account for the purposes of the MCR calculation unless:

1.3. The MCR for Long-term Insurance Business

(1) The MCR of a an AIFC-Incorporated Insurer carrying on Long-term Insurance Business is an amount not less than the higher of -

(2) Where an Insurer has entered into Contracts of Insurance falling within Long-Term Insurance Category 3 (Linked long-term business), the value of the total reserves in rule 1.3(1)(a) should be reduced by the value of the linked liabilities.

(3) Reinsurance ceded by an Insurer to an Associated Party shall not be taken into account for the purposes of the MCR calculation unless -