A solvency cover ratio is a fraction, and a fraction can fall because the numerator shrank or because the denominator grew. In 2023 ours fell for the second reason: own funds rose from £14.88m to £15.33m, while the Solvency Capital Requirement rose from £8.51m to £11.00m.
Almost all of that capital increase sits in one module. Non-life underwriting risk went from £6.31m to £8.93m — a 41% increase — driven by growth in gross written premium from £1.43m to £1.97m. The standard formula scales premium risk directly with volume. Write more business and the formula asks for more capital, whether or not the new business is worse.
Market risk barely moved, from £4.21m to £4.38m, which is what you would expect from a balance sheet that holds £16.35m in deposits and nothing else. Counterparty default risk stands at £122k. Operational risk is £55k. The diversification credit across modules is £2.49m.
The resulting cover of 139% remains well clear of the Board’s 110% tolerance floor. It is a lower number than 2022 and it reflects a larger book, not a weaker one.
The 2024 report, filed since, shows the same arithmetic running the other way. Own funds rose again, to £16.21m, while the requirement fell to £9.96m — market risk on the deposit book roughly halved as the portfolio shortened, and non-life underwriting risk eased with gross written premium down to £1.40m. Cover came back to 163%. Neither the 139% nor the 163% describes a change in how the business is run; both describe where the denominator happened to be standing at the year end.
Written by the underwriting team at FDI Insurance d.a.c., Dublin. This piece is general information, not advice on any particular transaction — and it is not an offer of insurance.
