GIM10150 - Non-resident insurers: the scope of UK taxing rights: accounting periods beginning before 1 January 2003: section 11 ICTA & Article 7 OECD Model: attribution of the investment return: FSA guidance

However, regulatory authorities and the market would expect an entity with insurance business to have a substantial margin of income-producing assets above its liabilities to policyholders and it will require this to be above the statutory solvency margin. A commonly quoted yardstick is available assets of at least 200% of statutory solvency requirements, although higher percentages would be appropriate for companies specialising in more volatile lines of business. This was confirmed by the FSA’s consultation paper CP 190 “Enhanced capital requirements and individual capital assessments for non-life insurers” (July 2003), which stated that

‘In the UK, we generally expect insurers to hold twice the EU minimum requirement, or a higher multiple for some types of business.’’

To a large extent this has now been overtaken by the FSA’s Integrated Prudential Sourcebook (PRU) ( GIM3120) which contains rules and guidance on capital adequacy which will require insurers to calculate a risk-based enhanced capital requirement (“ECR”) in excess of the EU minimum capital requirement (“MCR”). But it is an indication that the yardstick used in enquiries in previous years was rooted in regulatory practice.