What are the minimum capital requirements?

Insurance & Reinsurance (3rd edition)

Brazil Small Flag Brazil

The supervised entity must continuously meet a Minimum Capital Requirement (CMR), equivalent to the highest value between the base capital and the risk capital.
The base capital is composed of a fixed amount stipulated in the authorization to operate, plus a variable amount for operation in each of the regions of the country, according to the following table:

Region

States

Variable portion (R$)

Variable portion (£)

1

AM, PA, AC, RR, AP, RO

120.000

25.000

2

PI, MA, CE

120.000

25.000

3

PE, RN, PB, AL

180.000

35.000

4

SE, BA

180.000

55.000

5

GO, DF, TO, MT, MS

600.000

120.000

6

RJ, ES, MG

2.800.000

560.000

7

SP

8.800.000

1.760.000

8

PR, SC, RS

1.000.000

200.000

* EAPC non-profit will equal zero. EAPC is a corporation created to institute plans of income and framed within the jurisdiction of the Ministry of Finance and the National Council of Private Insurance (CNSP), being supervised by SUSEP. Local Reinsures: fixed amount of R$ 60 million.

The risk capital is the sum (through correlation) between capital instalments based on the risk of underwriting, credit, operation and market. It is worth mentioning that market risk capital is still being paid in. The payment of 100% was only required at the end of 2017.

Switzerland Small Flag Switzerland

The applicable minimum capital requirements depend on the type of insurance business conducted by an insurance company. In life insurance (Art 7 ISO) they are:

  • 5 million Swiss Francs for life insurers (excluding occupational schemes) that provide, exclusively, death benefits and/or waiver of premium in the event of disability;
  • 8 million Swiss Francs for life insurers (excluding occupational schemes) that provide in addition to death benefits and/or waiver of premium in the event of disability a capital guarantee or other guarantee at the maturity date;
  • 10 to 12 million Swiss Francs for collective life insurance in the framework of occupational schemes.

In non-life insurance (Art 8 ISO) they are:

  • 8 million Swiss Francs for most classes of non-life insurance business (excluding those mentioned under the following bullet point);
  • 3 million Swiss Francs for class B 9 (other property losses), B 16 (various financial losses), class B 17 (legal cost insurance), B 18 (assistance).

In reinsurance (ISO 9) they are:

  • 10 million Swiss Francs and 3 million for captive reinsurers.

Proposed amendments by Pre-Draft ISA (not exhaustive):

  • Amendments to ISO can be expected in the course of the revision of the ISA (details have not yet been published).

South Korea Small Flag South Korea

The minimum capital amount of an insurer subsidiary is KRW 30 billion while a branch office of a foreign insurer must have minimum operating funds of KRW 3 billion. The foregoing are minimum amounts and additional amounts for additional lines of business may be required. Other recent sources state that the FSC will permit minimum capital of KRW 1-3 billion for certain monoline licences where less capital is needed.

Peru Small Flag Peru

The SBS provides by means of a general rule of quarterly update the minimum stock capital of insurance companies and other companies in the financial system. As of the date of issuance of this questionnaire (March, 2019), the last update corresponding to the period January - March, 2019 is in force, the same that provides the following:

Insurance Companies

Minimum Capital

Companies operating in a single branch (general risks or life risks)

S/ 5’000,365.00

Companies operating in both branches (general risks and life risks)

S/ 6’873,658.00

Insurance and reinsurance companies

S/ 17’499,434.00

Reinsurance companies

S/ 10’625,776.00

China Small Flag China

According to Article 63 of the PRC Insurance Law, the minimum registered capital required for the establishment of an insurance company is RMB 200 million, which shall be fully paid-up in monetary form.

The minimum capital is the required capital of an insurer to guarantee the solvency of the insurer for the purpose of regulation. The minimum capital is composed by:

(1) Minimum quantitative risks capital, i.e. the minimum capital equivalent to insurance risks, market risks, and credit risks;
(2) Minimum control risks capital, i.e. the minimum capital equivalent to the control risks; and
(3) Additional capital, including countercyclical additional capital, additional capital of domestic emphasized insurance institution, additional capital of global emphasized insurance institution and other additional capital.

CBIRC could require the insurer to correct or launch penalties if the insurer is not in compliance with the minimum capital requirements

Denmark Small Flag Denmark

The minimum capital requirements for Danish insurance companies are based on the EU Solvency II Directive. The minimum requirements are as follows:

  • Non-life insurance companies: EUR 2.5 million
  • Life insurance companies: EUR 3.7 million
  • Re-insurance companies: EUR 3.6 million
  • Captive reinsurance companies: EUR 1.2 million

In addition to the minimum capital requirements, more specific capital requirements are stipulated in chapter 10 of the Danish Financial Institutions Act.

France Small Flag France

The minimum capital requirements (MCR), which is defined by Solvency II by reference to the Solvency Capital Requirement (SCR), constitutes the minimum financial threshold under which a (re)insurer’s financial resources should not fall. In France, (re)insurers’ MCRs:

  • are subject to an absolute floor (€2.5 million for non-life insurance undertakings; €3.7 million for life insurance undertakings; €3.6 million for reinsurance undertakings, and €1.2 million for captive reinsurance undertakings);
  • must correspond to 25% to 45% of the solvency capital requirement (SCR);
  • are calculated taking into account technical provisions, subscribed premiums, capital at risk, deferred taxes and administrative costs;
  • are calibrated to ensure a 85% confidence level over a one year period, and
  • are reported to the ACPR on a quarterly basis.

Germany Small Flag Germany

Section 122 VAG provides that the minimum capital requirement corresponds to an amount of eligible basic own funds below which policyholders and beneficiaries would be exposed to an unacceptable level of risk if the insurer was allowed to continue its operations. Accordingly, BaFin will withdraw an insurer's authorisation when the insurer's amount of eligible basic own funds falls below the minimum capital requirement and the insurer is unable to re-establish the amount of eligible basic own funds within a short period of time. The calculation used to determine the minimum capital requirement is set out in the Delegated Regulation 2015/35/EU.

Israel Small Flag Israel

Minimum capital – for non-life activities – NIS 59 million. However, if the company is a 100% Digital Company, the capital requirement is NIS 10 million.

For life activities – NIS 52 million. However, if the Company is a 100% Digital Company, the capital requirement is NIS 15 million.

Australia Small Flag Australia

APRA's Prudential Standard GPS 110 establishes that the minimum capital requirements for both general insurers and reinsurers is AUD 5 million, while LPS 110 states that the minimum capital requirements for both life insurers and reinsurers is AUD 10 million. However, the exact minimum capital varies between each entity. The individual requirements are based upon calculation of the Prescribed Capital Amount (PCA) for each insurer and reinsurer, which takes into account a number of different risk factors such as asset risk, asset concentration risk, insurance risk, insurance concentration risk and operational risk. The Prudential Capital Requirement establishes the PCA plus supervisory adjustments imposed by APRA and are measured on either APRA's standard method or an internal method approved by APRA. Each insurer and reinsurer must have capital in excess of the requirement and this will be dependent on the volume, mix and nature of each business.

Italy Small Flag Italy

Depending from the insured risk class, the Italian Private insurance Code requires that the insurance company’s minimum share capital or guarantee fund must not be less than:#

a for life insurance companies: €5 million;
b for non-life insurance companies:

  • €5 million for insurance classes 10 Motor, 11 Aircraft Liability, 12 Marine Liability, 13 General civil Liability, 14 Credit and 15 Bonds;
  • €2.5 million for insurance classes 1 Personal Accidents, 2 Illness, 3 Land vehicle (non-rail) vehicles , 4 Railway vehicles, 5 Aviation, 6 Hull & Yachts, 7 Chargo, 8. Fire and natural elements (damage to property, 16. Pecuniary losses of various kinds and 18 Assistance; and
  • €1.5 million for insurance classes 9 Other property damage caused by hail, frost or other event (theft) and 17 Legal protection;

c for companies intending to pursue life assurance, personal accident and sickness insurance simultaneously:

  • €5 million for life assurance; and
  • €2.5 million for the pursuit of personal accident and sickness insurance; and

d for mutual companies, the minimum share capital is reduced to half the here over listed amounts.

Japan Small Flag Japan

The minimum amount of capital of an insurance company is 1,000,000,000 yen (Article 6 of the Insurance Business Act, Article 2-2 of Order for Enforcement of the Insurance Business Act).

Poland Small Flag Poland

There are two solvency thresholds under the Solvency II Directive:

  • the Solvency Capital Requirement, and

  • the Minimum Capital Requirement.
  • Both capital requirements are harmonised throughout the EU. Poland follows the same solvency principles as other EU countries. This ensures a uniform level of protection for policyholders.

The SCR is the economic capital to be held by insurance and reinsurance undertakings in order to ensure that they will be in a position, with a probability of at least 99.5%, to meet their obligations to policyholders and beneficiaries over the following 12 months. It is calculated on the basis of either a standard formula or an internal model (in which case it must be approved by the KNF). The SCR should be calculated on the basis of the undertaking's true risk profile, taking account of the impact of possible risk-mitigation techniques, as well as diversification effects. The SCR should be calibrated so as to ensure that all quantifiable risks to which an insurance or reinsurance undertaking is exposed are taken into account. It should cover existing business, as well as the new business expected to be written over the following 12 months.

The MCR is a minimum level of security below which the amount of financial resources should not fall. It should neither fall below 25% nor exceed 45% of the SCR (including any capital add-on imposed in accordance with the Solvency II Directive). It should be calculated as a linear function of a set or sub-set of the insurer's technical provisions, written premiums, capital-at-risk, deferred tax and administrative expenses. It should be measured net of reinsurance.
There are the following minimum base amounts of MCR:

  • the PLN equivalent of EUR 3,700,000 - for life insurance undertakings and for non-life insurance companies offering civil liability insurance, credit insurance and insurance guarantees;
  • the PLN equivalent of EUR 2,500,000 - for non-life insurance undertakings in case of groups of insurance other than those listed above; and
  • the PLN equivalent of EUR 3,600,000 - for reinsurance undertakings.

Chile Small Flag Chile

See previous answer.

Mexico Small Flag Mexico

Pursuant to section 6.1.2 of the Circular, the minimum paid-in capital requirements may be updated by the CNSF before 30 June each year. The minimum paid-in capital requirements for insurance and reinsurance companies in effect as of 31 March 2018 for each line of business are the following:

Operations and Lines of Business

Minimum Paid-In Capital Stock in Investment Units (Unidades de Inversión) (“UDIS”)

Minimum Paid-In Capital Stock in Mexican Pesos

Life

6’816,974

$37’922,029

Annuities under social security laws

28’000,000

$155’760,724

Personal Accident and/or Medical Expenses Line of Business

1’704,243

$9’480,504

Healthcare Line of Business

1’704,243

$9’480,504

Property & Casualty, One Line of Business

5’112,730

$28'441,519

Property & Casualty, Two Lines of Business

6’816,974

$37’922,029

Property & Casualty, Three or more Lines of Business

8’521,217

$47’402,533

Credit Insurance

12’200,000

$67’867,173

Financial Guarantee Insurance

33’200,000

$184’687,716

United Kingdom Small Flag United Kingdom

Solvency II introduced a risk-based capital regime, requiring insurers to assess the individual risks they are subject to on both sides of the balance sheet and hold sufficient capital against these risks.

There are two capital requirements under Solvency II: the minimum capital requirement (“MCR”) and the solvency capital requirement (“SCR”). SCR is the quantity of capital required to be held to protect against unexpected losses over the following year subject to a confidence level of 99.5%. MCR is set at a lower threshold - a confidence level of 85%. Insurers calculate their SCR using a standard formula, which is a standardised calculation set out in the Delegated Acts, or (subject to prior regulatory approval) a full or partial internal model which is tailored to the risk profile of the particular insurer.

Life Insurers may also seek regulatory approval to apply a 'matching adjustment' when calculating their liabilities which provides capital relief when holding certain long-term assets which match the cash flows of a designated portfolio of life or annuity insurance and reinsurance obligations.

Breach of SCR triggers regulatory intervention, designed to ensure SCR capital levels are restored, and breach of MCR can lead to an insurer losing its authorisation if the breach is not remedied within three months.

UAE Small Flag UAE

The Financial Regulations dictate that the minimum capital requirements are 100million Dirhams for insurers and 250million Dirhams for reinsurers. In addition, the Financial Regulations now require that:

• Insurers maintain a minimum guarantee fund, which is not less than one third of the Solvency Capital Requirement;

• Insurers calculate their solvency margin using the template developed and amended by the IA;

• An insurer’s Solvency Capital Requirement must take into account underwriting risk, market and liquidity (investment) risk, credit risk and operational risk;

• The Financial Regulations require insurers to notify the IA immediately in the event of non-compliance with the Minimum Capital, Solvency Capital Requirement or Minimum Guarantee Fund.

As per the Cabinet Resolution No. 7 of 2019 Concerning the Administrative Fines Imposed by the Insurance Authority, the failure of an insurer to comply with the Solvency Margin and the Minimum Guarantee Fund in accordance with the provisions of the Financial Regulations will result in a fine of 150,000 Dirhams.

Belgium Small Flag Belgium

The minimum capital requirements (MCR) constitute the minimum financial threshold of a (re)insurance undertaking. In Belgium, the MCR of a (re)insurance undertaking is as follows:

• It is subject to an absolute floor (€2.5 million for non-life insurance undertakings, except for classes 10 to 15; €3.7 million for life insurance undertakings; €3.6 million for reinsurance undertakings, and €1.2 million for captive reinsurance undertakings);

• It is calculated taking into account technical provisions, premiums written, capital at risk, deferred taxes and administrative costs;

• It must correspond to 25% to 45% of the solvency capital requirement (SCR);

• It is calibrated to ensure a 85% confidence level over a one year period; and

• It is reported to the NBB on a quarterly basis.

United States Small Flag United States

There are no uniform minimum capital requirements for insurers in the U.S. Instead, each state’s regulator sets the minimum level of capital and surplus that insurers are required to maintain. The minimum capital and surplus lines requirements are set depending upon the types of business that a company writes with different requirements typically set for property/casualty insurance companies and accident and health insurers.

In addition to these minimum requirements and under the RBC approach discussed above, insurers may be required to maintain additional capital and surplus levels based upon various risk factors applicable to their business operations as determined by the regulators.

Indonesia Small Flag Indonesia

The minimum issued and paid-up capital requirements are:

(a) Rp150 billion (about US$10.5 million) for an insurance company;
(b) Rp300 billion (about US$21 million) for a reinsurance company;
(c) Rp100 billion (about US$7 million) for a sharia insurance company;
(d) Rp175 billion (about US$12 million) for a shariareinsurance company;
(e) Rp3 billion (about US$200,000) for an insurance brokerage company;
(f) Rp5 billion (about US$350,000) for a reinsurance brokerage company; and
(g) Rp500 million (about US$35,000) for a loss adjustment company.

India Small Flag India

An insurer/Indian reinsurer is required to have a minimum paid up equity share capital of INR 100 crores (c. US$ 14,452,000).

A foreign reinsurer seeking to set up a branch office in India is required to have a minimum net owned fund of INR 5,000 crores (c. US$ 722,625,000) and is further required to infuse a minimum assigned capital of INR 100 crores (c. US$ 14,452,000) into the branch office.

Syndicates of Lloyd’s India are required to maintain a minimum assigned capital of INR 5 crores (c. US$ 722,625) through their service companies set up in India.

The minimum capital requirement for brokers is in the following terms:
• Direct brokers - INR 75 lakh (c.US$ 108,393);
• Reinsurance brokers - INR 4 crore (c.US$ 578,100);
• Composite brokers - INR 5 crore (c.US$ 722,625).

Thailand Small Flag Thailand

A life (re)insurance company and non-life (re)insurance company must have a registered capital of at least THB 500 Million and THB 300 Million (all fully paid-up), respectively. A reduction of registered capital is prohibited unless prior written permission of the OIC is obtained.

Austria Small Flag Austria

Article 193(2) VAG sets out the following minimum capital requirements for insurers and reinsurers:

  • EUR 2.5 million for non-life insurance companies, excluding those providing indemnity insurance, credit insurance and fidelity insurance;
  • EUR 3.7 million for non-life insurance companies, including those providing indemnity insurance, credit insurance and fidelity insurance;
  • EUR 5.2 million for composite insurance companies;
  • EUR 3.7 million for life insurance companies;
  • EUR 3.6 million for reinsurance companies;
  • EUR 1.2 million for captive reinsurance companies; and
  • in case of composite insurance companies, at least the sum of the minimum capital requirements for non-life and life insurance companies.

In addition, insurance companies are required to prove fulfilling the solvency capital requirements which have to be calculated in accordance with Article 174 et seq. VAG.

Ireland Small Flag Ireland

The capital requirements set out in Pillar 1 of Solvency II and prescribed the 2015 Regulations consist of two distinct capital requirements: a solvency capital requirement (“SCR”) and a lower, minimum capital requirement (“MCR”), which are calculated based on the specific risks borne by the (re)insurer and are prospective in nature. The SCR and MCR both represent the capital requirements that must be held in addition to its technical provisions.

A (re)insurer may calculate the SCR based on the formula set out in the 2015 Regulations or by using its own internal model approved by the Central Bank. The SCR should amount to a high level of eligible own funds, thereby enabling the undertaking to withstand significant losses and ensure a prudent level of protection for policyholders and beneficiaries. The MCR should be calculated in a clear and simple manner, corresponding to an amount of eligible basic own funds, below which policyholders and beneficiaries would be exposed to an unacceptable level of risk if the undertaking were allowed to continue its operations.

A (re)insurer must have procedures in place to immediately identify and inform the Central Bank of any deterioration in its financial condition. As such, the reporting requirements in respect of SCR and MCR provide for clear channels by which the Central Bank can monitor the financial state of a (re)insurer. In the event of a breach of capital requirements, the Central Bank will employ an escalating level of supervisory intervention, beginning with the implementation of a recovery plan by the (re)insurer, as approved by the Central Bank. If there is a breach of the SCR or MCR, compliance must be re-established by the (re)insurer within six months or three months respectively, otherwise, the Central Bank may require the (re)insurer to hold additional capital, restrict the free disposal of its assets and ultimately withdraw its authorisation.

Updated: July 23, 2019