The Solvency Capital Requirement we publish is calculated on the standard formula, which sizes non-life underwriting risk from premium and reserve volume rather than from our own claims experience. Write more premium and the formula asks for more capital in the same year, before a single claim has been notified.
Our own numbers show it plainly. Gross written premium of £1.97m in 2023 carried a non-life underwriting risk charge of £8.93m and an SCR of £11.00m. In 2024 premium came back to £1.40m, the underwriting module eased to £8.70m, and the SCR fell to £9.96m. Nothing changed about how the book is selected between those two years.
The other half of the movement had nothing to do with underwriting at all. Market risk on the deposit portfolio fell from £4.38m to £2.32m as the portfolio shortened, which is the single largest reason our cover ratio recovered from 139% to 163%. A reader who takes the cover ratio as a verdict on underwriting quality will draw the wrong conclusion in both directions.
This is the trade-off the standard formula was designed for. An internal model would let us argue that a book of conditional bonds with a counter-indemnity behind each one is less volatile than the calibration assumes. It would also cost more to build, run and have approved than it could plausibly save an undertaking of our size, so we use the formula, we say which module moved, and we publish the components rather than the headline alone.
What we watch instead is the tolerance. The Board holds cover above 110% at all times and sets a target for each reporting period. That floor is the number that would change how we write, and it has not moved.
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.
