Solvency Capital Requirement: Standard Formula Basics
A plain-language explainer of how standard-formula SCR thinking combines risk modules, diversification, and capital charges into a solvency benchmark.
This extension page exists to support specific long-tail queries with formula-first explanations. It is intentionally narrow, deliberately opinion-free, and designed to lead into the relevant calculator rather than replace it.
Plain Figures does not recommend products, wrappers, or financial actions here. The goal is to make the arithmetic and the assumptions visible.
Core Formula
- SCR_i = module capital charge
- Corr_ij = diversification matrix
- Aggregated capital is lower than a simple sum when risks are imperfectly correlated
Why SCR is an aggregation problem
The standard formula does not simply add every capital charge together. It recognises that different risks do not peak together in a fully additive way.
That makes diversification central to the calculation and central to the explainer.
Why the page fits Plain Figures
Users searching for SCR basics usually want the mechanics, not broad regulatory commentary.
A formula-first page can meet that intent cleanly without drifting into legal interpretation.
FAQ
Why is the total SCR not just the sum of all module SCRs?
Because diversification is recognised through the correlation matrix.
Does this page provide regulatory advice?
No. It explains the mechanics at a high level and does not replace legal, actuarial, or supervisory guidance.
Disclaimer
Open the matching calculator to apply the guide to your own numbers.
Keep moving through the same topical cluster with nearby explainers that support the calculator.