What is the definition of Free Surplus in this framework?

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Multiple Choice

What is the definition of Free Surplus in this framework?

Free Surplus is the amount of capital available to shareholders after setting aside funds to cover policy obligations and the capital needed to absorb risk. In this framework, you take assets, subtract the technical provisions (the reserves for policy obligations), and then subtract the Solvency Capital Requirement (SCR). What remains is the cushion that can be used beyond obligations and required risk capital. Therefore, Free Surplus = Assets − Technical Provision − SCR. For example, if assets are 1000, technical provisions are 700, and SCR is 200, the Free Surplus is 1000 − 700 − 200 = 100. This concept is distinct from simply assets minus liabilities or assets minus MCR, since the SCR is the risk-based capital that must be held beyond the reserves.

Free Surplus is the amount of capital available to shareholders after setting aside funds to cover policy obligations and the capital needed to absorb risk. In this framework, you take assets, subtract the technical provisions (the reserves for policy obligations), and then subtract the Solvency Capital Requirement (SCR). What remains is the cushion that can be used beyond obligations and required risk capital. Therefore, Free Surplus = Assets − Technical Provision − SCR.

For example, if assets are 1000, technical provisions are 700, and SCR is 200, the Free Surplus is 1000 − 700 − 200 = 100. This concept is distinct from simply assets minus liabilities or assets minus MCR, since the SCR is the risk-based capital that must be held beyond the reserves.

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