What are the minimum capital requirements?

Insurance & Reinsurance

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).

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.

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.

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.

Turkey Small Flag Turkey

Insurance companies shall raise their paid-up capitals up to such amount to be required by the Undersecretariat for each insurance type in respect of their license. The minimum capital requirement for insurance companies is TRY 5,000,000.-. The Undersecretariat might increase the required minimum paid capital amount for each applied branch license.

Ireland Small Flag Ireland

The Solvency II capital requirements prescribed in the 2015 Regulations are calculated based on the specific risks borne by the relevant insurer and are prospective in nature. In calculating its solvency and capital requirements insurers are required to include both existing business and any new business expected to be written over the following 12 months. Solvency II imposes a solvency capital requirement (“SCR”) and a lower, minimum capital requirement (“MCR”) on insurance undertakings.

An insurance undertaking 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.

An insurance undertaking 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 an insurance undertaking. 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 an insurance undertaking, as approved by the Central Bank. Where there is a breach of the SCR or MCR, compliance must be re-established within six months or three months respectively, otherwise the Central Bank may restrict the free disposal of the assets of the undertaking and ultimately withdraw its authorisation.

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.

Sweden Small Flag Sweden

The minimum capital requirement is the amount of eligible basic own funds below which it is less than an 85 % probability that the insurance company have enough funds to cover its undertakings towards policyholders and beneficiaries in the coming 12-month period. Meeting this capital requirement is an essential requirement for an insurance company to continue its insurance business. If an insurance company fails to meet the minimum capital requirement, the insurance company must immediately notify the FSA of the said failure.

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.

Norway Small Flag Norway

The minimum capital requirements for Norwegian insurance companies follow from section 3-4 of the Financial Institutions Act, which is based on the Solvency II Directive (2009/138/EC). The minimum requirements are as follows:

  • Life insurance companies: MEUR 3.7
  • Non-life insurance companies: MEUR 2.5, or MEUR 3.7 in case the company is covering certain liability insurance products or credit or guarantee insurances
  • Re-insurance companies: MEUR 3.6 (limited to MEUR 1.2 for companies which only covers risks on behalf of a limited number of clients as defined in its statutes)

In addition to the minimum capital requirements, more specific capital requirements are stipulated in chapter 14 (II) of the Financial Institutions Act.

Mexico Small Flag Mexico

The following are the minimum paid-in capital requirements for insurance and reinsurance companies in effect as of 31 March 2018 determined by the SHCP for each line of business:

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

UAE Small Flag UAE

As per IA Resolution No. 42 of 2009, a UAE licensed Insurer must have paid up capital of at least 100,000,000 Dirhams. A UAE licensed Reinsurer must have paid up capital of no less than 250,000,000 Dirhams.

Minimum capital requirements for an insurance brokerage, as per Resolution No. 15 of 2013 are 3,000,000 dirhams. It is noted that foreign companies or free zone entities can establish branches within onshore UAE, but the capital requirements for this option are 10,000,000 Dirhams. Additionally, a broker must obtain a bank guarantee in favor of the IA in an amount of at least 3,000,000 Dirhams.

The capital requirements for DIFC establishments are quite variable, and depend on the specific activity that the entity is engaged in. The relevant capital adequacy regulations, set by the DFSA, are risk based and require analysis on a case by case basis. Having said this, a general rule of thumb is that an initial investment of US $1,000,000 is required to obtain a DIFC/DFSA Category 4 license, which will permit the licensee to engage in the insurance intermediary activity.

United States Small Flag United States

All state insurance laws set forth minimum capital and surplus requirements in order obtain a license to write insurance. The minimum requirements differ among the states and vary according to the kind of insurance that will be offered and the number of lines of business that are included in the license. The minimum capital levels were set, in many cases, years or decades ago and are relatively low by today’s standards.

Thus, in practice, state insurance regulators often require far higher levels of capital as a condition of licensure or a change of control. The regulator’s determination of the required capital level is based largely on the kind of insurance business at issue and the insurer’s business plan and financial projections.

As noted above, risk-based capital requirements play a significant role in measuring capital requirements for insurers based on the amount and risk in an insurer’s assets and liabilities.

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.

Chile Small Flag Chile

To form and obtain an authorization, an insurance company (regardless of whether it is general and casualty, life, or credit insurance) requires a minimum capital in the amount of UF 90,000 which amounts to approximately USD 4,077 million; said capital has to be fully underwritten and paid.

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 (Art 9 ISO) they are:

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

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, 2018), the last update corresponding to the period January - March, 2018 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/ 4’844,221

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

S/ 6’659,018

Insurance and reinsurance companies

S/ 16’952,988

Reinsurance companies

S/ 10’293,970

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$ 15,410,000).

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$ 770,500,000) and is further required to infuse a minimum assigned capital of INR 100 crores (c. US$ 15,410,000) into the branch office.
Syndicates of Lloyd’s India are required to maintain a minimum assigned capital of INR 5 crores (c. US$ 770,500) 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$ 115, 575);
  • Reinsurance brokers - INR 4 crore (c.US$ 616,400);
  • Composite brokers - INR 5 crore (c.US$ 770500).

Singapore Small Flag Singapore

Direct Insurers (excluding insurers underwriting investment-linked policies or short term accident and health policies only) S$10 million
Direct Insurers (investment-linked policies and short-term accident and health policies) S$5 million
Captive Insurer S$400,000
Approved Marine, Aviation and Transit Insurer S$2 million, in the form of a bank deposit
Reinsurer S$25 million
Authorised Reinsurer S$2 million per class of authorised reinsurance business, and in the form of a bank deposit

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

30.000

2

PI, MA, CE

120.000

30.000

3

PE, RN, PB, AL

180.000

45.000

4

SE, BA

180.000

45.000

5

GO, DF, TO, MT, MS

600.000

150.000

6

RJ, ES, MG

2.800.000

700.000

7

SP

8.800.000

2.200.000

8

PR, SC, RS

1.000.000

250.000

* 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% will only be required by the end of 2017.

Israel Small Flag Israel

Minimum capital – for non-life activities – NIS 35 million (i.e. about $ 9 million)

For life activities – NIS 50 million (i.e. app. $ 13 million)

Belgium Small Flag Belgium

The minimum capital requirement (‘MQR’) corresponds to the amount of eligible basic own funds below which an insurance undertaking can no longer be considered as viable (Article 189 of the Supervision Act). In that case, there is an unacceptable level of risk were the undertaking to be allowed to continue its operations. The MQR must be calculated in a clear and simple manner. In doing so, the undertaking must use a linear function. This function is to be calibrated to the Value-at-Risk of the basic own funds of the undertaking, subject to a confidence level of 85 % over a one-year period. The MQR also has an absolute floor which varies between 1,200,000 EUR and 3,700,000 EUR, depending on the activities and on the insurance branches. Moreover, the MQR cannot fall below 25 % nor exceed 45 % of the undertaking’s Solvency Capital Requirement. The MQR must be calculated at least quarterly, and the results of that calculation must be reported to the NBB.

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.

Canada Small Flag Canada

The ICA requires federally regulated insurance companies to maintain adequate capital and companies operating in Canada on a branch basis to maintain an adequate margin of assets in Canada over liabilities in Canada. In this regard, life insurers must comply with the Minimum Continuing Capital and Surplus Requirements (MCCSR) Guideline while property and casualty insurers must comply with the Minimum Capital Test (MCT) Guideline. Both guidelines outline the capital framework, using a risk-based formula, for target and minimum capital/margin required, and define the capital/assets that are available to meet the minimum standard. In theory, an insurer could commence to carry on business with as little as five million dollars in capital (a minimum set many years ago) but that amount is unlikely to suffice to meet the current risk-based tests. OSFI generally requires companies to maintain a capital target sufficiently above the minimum levels required to satisfy the tests.

Spain Small Flag Spain

In terms of shareholding capital, the Act 2015 requires the following minimum ones depending on the class of business: € 9,015,000 for life, surety, credit, liability and reinsurance; € 2,103,000 for accident, illness, legal expenses, assistance and funeral insurance; € 3,005,000 for the rest of classes.

In addition, the Act 2015 provides that insurers and reinsurers shall have net equity sufficient to cover the minimum required capital, which shall be the amount of admissible basic equity under which policyholders and beneficiaries would be exposed to an unacceptable level of risk. The Act 2015 establishes certain parameters in order to calculate the minimum required capital, and states that such minimum required capital shall not be lower than 25% of nor higher than 45% of the required solvency capital, subject to the following absolute minimum: € 2,500,000 for insurers, including captives, writing non-life except for liability, surety and credit where the minimum shall be € 3,700,000; € 3,700,000 for insurers, including captives, writing life insurance; €3,600,000 for reinsurers, except for captives, in which case the minimum shall be €1,200,000. The minimum required for insurers writing life and non-life insurance shall be addition of the abovementioned required capitals.

Portugal Small Flag Portugal

PIRL sets forth the minimum share capital requirements for insurance and reinsurance undertakings as follows:

a. The minimum share capital for the purposes of incorporating an insurance undertaking is:

i) € 2,500,000 for the purposes of exclusively pursuing the distribution of one of the following insurance lines: illness, juridical protection or assistance;
ii) € 7,500,000 in the event the undertaking pursues the distribution of more than one of the types of insurance lines mentioned under paragraph a. or other non-life insurance lines;
iii) € 7,500,000 for the purposes pursuing life insurance activities;
iv) € 15,000,000 in case it pursues both life and non-life insurance activities.

b. The minimum share capital for the purposes of incorporating a reinsurance undertaking is:

i) € 7,500,000 for life or non-life reinsurance undertakings;
ii) € 15,000,000 for the purpose of pursuing all types of reinsurance activities;
iii) € 3,750,000 in case of mutual reinsurance.

As regards minimum capital requirements, PIRL sets forth a minimum level of security below which the corresponding capital should not fall. The minimum capital requirement has an absolute floor of:

a. € 2,500,000 for non-life insurance undertakings, including captive insurance undertakings;
b. € 3,700,000 for life insurance undertakings, including captive insurance undertakings;
c. € 3,600,000 for reinsurance undertakings, except in case of captive insurance undertakings, where the floor shall be € 1,200,000.

Updated: May 21, 2018