Solvency & Financial Condition Report 2021
The position at 31 December 2021
As filed with the Central Bank of Ireland. All amounts in thousands of GBP on a Solvency II valuation basis, with the quantitative reporting template shown against each figure.
Croagh Patrick, Co. Mayo · Vicuna R, CC BY-SA 2.0
£14.8m
Eligible own funds (SCR)
S.23.01.01 R0540
£8.24m
Solvency Capital Requirement
S.25.01.21 R0220
179.59%
SCR cover ratio
Board target 125% for 2021
471.65%
MCR cover ratio
S.23.01.01 R0640
What changed from 2020
Eligible own funds
+£94k
Capital requirement
−£381k
Cover ratio
+9.03 pts
Own funds rose and the capital requirement fell, so cover improved on both sides of the fraction. Profits were retained in the company rather than distributed, and the requirement eased with the size of the book and the shape of the deposit portfolio.
Template S.02.01.02
Balance sheet
Totals as filed for 2021. The line-by-line composition is set out in the report itself; only the totals are reproduced here.
| Asset | Amount |
|---|---|
| Total assets | £16,695k |
| Liability | Amount |
|---|---|
| Total liabilities | £1,895k |
| Excess of assets over liabilities | Amount |
|---|---|
| S.02.01.02 R1000 | £14,800k |
Template S.25.01.21
Risk profile
The two material modules for a credit and suretyship writer, as reported for 2021.
| Risk module | Capital charge |
|---|---|
| Market risk (R0010) | £4,188k |
| Non-life underwriting risk (R0050) | £6,022k |
| Solvency Capital Requirement (R0220) | £8,241k |
Template S.05.01.02
Premiums written
Gross direct premiums written in credit and suretyship insurance and proportional reinsurance, the company’s single line of business. Risk is located predominantly in the United Kingdom.
| Measure | Amount |
|---|---|
| Gross premiums written (R0110) | £1,383k |
Template S.28.01.01
Minimum Capital Requirement
The MCR is the floor beneath the SCR — the point at which a supervisor must intervene. It is calculated linearly from net technical provisions and net written premiums, then subjected to a floor and a cap expressed as a proportion of the SCR.
For FDI Insurance, the linear calculation produces a figure far below the floor, so the reported MCR is the absolute minimum set for the class of business rather than anything the book itself generates. Cover of 471.65% means eligible own funds are more than 4 times that floor.
| Input | Amount |
|---|---|
| Minimum Capital Requirement (R0410) | £3,109k |
| Eligible own funds to meet the MCR (R0550) | £14,664k |
| MCR cover ratio (R0640) | 471.65% |
Report narrative, 2021
Chapters A to E
The narrative sections of the 2021 report. The company’s business model, governance arrangements and valuation approach have not changed materially across the 7 reporting periods published here.
A. Business and performance
- A single Solvency II line of business: credit and suretyship insurance and proportional reinsurance.
- Risk is located predominantly in the United Kingdom; none is written outside the EEA and UK.
- Investment return arises from interest on short-term bank deposits, not from market exposure.
- The Minimum Capital Requirement is driven by the absolute euro floor for the class rather than by the linear calculation.
- Operating results have been positive with profits retained rather than distributed.
B. System of governance
- A Board of Directors including non-executive directors, with an appointed Chairman.
- Risk Management, Actuarial, Compliance and Internal Audit operate as the four key functions.
- Fitness and probity is assessed on appointment and annually thereafter, per the Central Bank’s standards.
- The Own Risk and Solvency Assessment is reviewed and approved by the Board each year.
C. Risk profile
- Underwriting risk on the credit and suretyship book is the largest single module.
- Market risk arises almost entirely from the deposit portfolio and from currency, as the company reports in sterling.
- Counterparty default risk is limited to reinsurance recoverables and bank deposits.
- No use is made of the matching adjustment, the volatility adjustment or any transitional measure.
D. Valuation for solvency purposes
- The balance sheet is simple enough that Solvency II valuation requires no bespoke models.
- Technical provisions comprise a best estimate plus a risk margin, discounted on the prescribed curve.
- Deposits are carried at amounts recoverable; there are no equities, bonds or structured assets held.
- Deferred tax is recognised on the difference between GAAP and solvency valuations.
E. Capital management
- Own funds are almost entirely unrestricted Tier 1 — ordinary share capital and the reconciliation reserve — with a small Tier 3 item for the net deferred tax asset.
- The Solvency Capital Requirement is calculated on the standard formula, with no undertaking-specific parameters and no simplifications.
- The Board sets an SCR cover target each year and holds a tolerance floor of 110% beneath it.
- There was no period of non-compliance with either the SCR or the MCR during the reporting period.
Authorised by the Central Bank of Ireland to carry on the business of insurance in accordance with the European Union (Insurance and Reinsurance) Regulations 2015 (S.I. 485 of 2015). Capital is calculated on the standard formula. No use of the matching adjustment; No use of the volatility adjustment; No transitional measure on the risk-free interest rate; No transitional measure on technical provisions. There was no period of non-compliance with either the Solvency Capital Requirement or the Minimum Capital Requirement during the reporting period.