SFCR Solvency II (Pillar 3)
Get Started with This SkillOverview
The SFCR Solvency II (Pillar 3) skill helps Rakenne users prepare and review the Solvency and Financial Condition Report required under Solvency II (Directive 2009/138/EC) and the Delegated Regulation (EU) 2015/35. It covers the full SFCR structure — chapters A through E, QRT template references, own-funds tiering, and SCR/MCR coverage ratios. The skill includes a regulatory reference guide, SFCR template, compliance checklist, and two validation tools: one for structural and narrative-to-QRT consistency, and one for MCR/SCR ratio arithmetic.
Getting Started
Add your source materials to the project workspace (existing SFCR draft, QRT data, board reports) and activate the SFCR Solvency II (Pillar 3) skill. The agent will guide the process: identify the undertaking context, structure the report using the template, apply the checklist, and run both validation tools. The result is saved with a compliance report and prioritised recommendations.
Example Conversation
Below is an example of how a typical SFCR review session might unfold. The agent collects context, applies the template and checklist, and runs the validation tools.
You: We need to review our SFCR draft before submission to BaFin. We are a mid-sized non-life insurance undertaking using the standard formula. The draft is in
docs/sfcr_2025.md.Agent: I’ll help review the draft against Solvency II Pillar 3 requirements. To tailor the review, I need to confirm a few things:
- Is this a solo or group SFCR?
- Do you apply any long-term guarantee (LTG) or transitional measures?
- Has there been any non-compliance with SCR or MCR during the reporting period?
You: Solo SFCR, no LTG or transitional measures, no non-compliance events.
Agent: I’ve read the draft and run both validation tools. Summary:
- Pillar 3 Disclosure Analyzer: All five mandatory chapters (A–E) are present. Sub-sections B.6 (Actuarial Function) and C.6 (Other Material Risks) are missing. QRT references S.05.02, S.19.01, and S.22.01 are not found — S.22.01 can be omitted since no LTG/transitional measures apply, but S.05.02 and S.19.01 should be included for a non-life undertaking. 7 unfilled placeholders remain.
- MCR/SCR Ratio Validator: SCR coverage ratio calculated at 185.2%, consistent with the reported 185%. MCR coverage ratio calculated at 412.7%, matching the stated 413%. MCR is 33.1% of SCR — within the 25%–45% corridor. MCR above the absolute floor (EUR 3.7m). Own funds tiering by Tier 1/2/3 is properly disclosed.
- Updated the checklist in
output/checklist_sfcr_2025.mdwith pass/partial/fail per item. Key gaps: add B.6 Actuarial Function and C.6 Other Material Risks sub-sections, include S.05.02 and S.19.01 in the QRT annex, fill 7 remaining placeholders.Shall I draft the missing sub-sections B.6 and C.6 using the template structure?
You: Yes, please draft both. Also add S.19.01 to the QRT annex — we have the claims development triangle ready.
Agent: Done. B.6 now includes the actuarial function mandate, independence, and key activities during the reporting period. C.6 covers strategic, reputational, and emerging risks (including climate risk assessment). S.19.01 has been added to the QRT annex with a cross-reference to Chapter D.2. The validation re-run shows all mandatory chapters and sub-sections present, QRT references complete for a non-life insurer without LTG measures, and 4 remaining placeholders (premium amounts in A.2 and technical provision figures in D.2). Once you fill those in, the SFCR will be structurally compliant.
Document Excerpt
Below is a representative excerpt from an SFCR Chapter E (Capital Management) produced with the support of this skill.
SFCR — Chapter E Excerpt
Undertaking: Europa Insurance NV
Reporting period: 01/01/2025 to 31/12/2025
Supervisory authority: BaFin
Regulatory basis: Solvency II Directive 2009/138/EC, Delegated Regulation (EU) 2015/35
E.1 Own Funds
The undertaking’s own funds are composed as follows (reference S.23.01):
| Item | Tier 1 Unrestricted | Tier 1 Restricted | Tier 2 | Total |
|---|---|---|---|---|
| Ordinary share capital | 50,000 | — | — | 50,000 |
| Reconciliation reserve | 127,400 | — | — | 127,400 |
| Subordinated liabilities | — | 15,000 | 25,000 | 40,000 |
| Total Own Funds | 177,400 | 15,000 | 25,000 | 217,400 |
| Eligible for SCR | 177,400 | 15,000 | 25,000 | 217,400 |
| Eligible for MCR | 177,400 | 15,000 | 5,000 | 197,400 |
Amounts in EUR thousands.
Reconciliation from IFRS equity to Solvency II own funds: IFRS equity of EUR 195,600k adjusted for Solvency II valuation differences on technical provisions (+18,200k), deferred tax impact (−11,400k), and reclassification of subordinated liabilities (+15,000k), resulting in total Solvency II own funds of EUR 217,400k.
Tiering limits are met: Tier 1 unrestricted represents 81.6% of SCR (minimum 50%), and no Tier 3 items are held.
E.2 Solvency Capital Requirement and Minimum Capital Requirement
SCR Calculation (Standard Formula):
| Risk Module | SCR Component (EUR k) |
|---|---|
| Non-life underwriting risk | 62,500 |
| Market risk | 38,200 |
| Counterparty default risk | 12,800 |
| Health underwriting risk | 4,100 |
| Diversification | (18,900) |
| Basic SCR | 98,700 |
| Operational risk | 19,700 |
| Loss-absorbing capacity of TP | (0) |
| Loss-absorbing capacity of DT | (1,000) |
| SCR | 117,400 |
Reference: S.25.01.
MCR Calculation (reference S.28.01):
| Item | Amount (EUR k) |
|---|---|
| Linear MCR | 42,600 |
| SCR | 117,400 |
| MCR cap (45% of SCR) | 52,830 |
| MCR floor (25% of SCR) | 29,350 |
| Combined MCR | 42,600 |
| Absolute floor | 3,700 |
| MCR | 42,600 |
MCR as percentage of SCR: 36.3% — within the 25%–45% corridor. MCR above the absolute floor of EUR 3.7m.
Coverage Ratios:
| Ratio | Value |
|---|---|
| Eligible Own Funds to meet SCR | 217,400 |
| SCR | 117,400 |
| SCR Coverage Ratio | 185.2% |
| Eligible Own Funds to meet MCR | 197,400 |
| MCR | 42,600 |
| MCR Coverage Ratio | 463.2% |
This excerpt is illustrative. Final content must reflect the undertaking’s actual data and the applicable regulatory requirements.
Validations Performed by the Extension Tools
The skill includes two extension tools that automate structural and quantitative checks on SFCR drafts.
Tool 1: pilar_3_disclosure_analyzer
Analyses the SFCR draft for structural completeness and narrative-to-QRT consistency.
| Check | Description |
|---|---|
| Mandatory chapters (A–E) | Verifies the presence of all five top-level SFCR chapters required by Art. 51-56 of the Directive. Missing chapters are reported as ERROR. |
| Sub-sections (A.1–E.6) | Checks for all expected sub-sections per the Delegated Regulation Art. 290-298 (e.g. A.1 Business, B.3 Risk Management System, E.2 SCR and MCR). Missing sub-sections are reported as WARNING. |
| QRT template references | Scans for references to public disclosure QRT templates: S.02.01, S.05.01/02, S.12.01, S.17.01, S.22.01, S.23.01, S.25.01/02/03, S.28.01/02. Missing QRT references are reported as WARNING so the user can confirm whether they are applicable. |
| Narrative–QRT consistency | Cross-checks that narrative discussions (own funds, SCR, MCR, technical provisions, underwriting performance) reference the corresponding QRT template. Flags cases where narrative exists but the QRT reference is absent. |
| Additional disclosures | Checks for ORSA summary, volatility/matching adjustment, transitional measures, material changes, and dividend policy. Reports as WARNING if not found. |
| Unfilled placeholders | Detects patterns like [text in brackets], ..., {}, XXX, ___, [TODO], and [TBD]. Lists up to 20 unique placeholders and reports the total count. |
Tool 2: mcr_scr_ratio_validator
Validates the MCR and SCR coverage ratios and related arithmetic in the SFCR.
| Check | Description |
|---|---|
| SCR coverage ratio | Extracts Eligible Own Funds and SCR from the document, calculates the ratio, and compares it to the stated ratio. Reports ERROR if the difference exceeds 1 percentage point. |
| MCR coverage ratio | Extracts Eligible Own Funds (for MCR) and MCR, calculates the ratio, and compares it to the stated ratio. Reports ERROR if the difference exceeds 1 percentage point. |
| MCR corridor (25%–45% of SCR) | Verifies that the MCR falls within the regulatory corridor per Art. 129(3). Reports ERROR if outside bounds. |
| MCR absolute floor | Checks that the MCR is above the absolute floor (default EUR 3.7m; configurable for composite undertakings at EUR 6.2m). Reports ERROR if breached. |
| SCR/MCR breach detection | Flags if coverage ratios fall below 100%, referencing Art. 138 (SCR breach) or Art. 139 (MCR breach) disclosure and recovery plan requirements. |
| Own Funds tiering | Checks whether Tier 1/2/3 classification is discussed in the document. Reports WARNING if not found. |
Usage
Both tools are automatically invoked by the agent during the SFCR workflow. They can also be called directly:
pilar_3_disclosure_analyzer path="docs/sfcr_draft.md"
mcr_scr_ratio_validator path="docs/sfcr_draft.md" mcr_absolute_floor=3.7
Result Interpretation
- COMPLIANT — All mandatory sections present, QRT references consistent, ratios correctly calculated. Review any remaining warnings for completeness.
- REVIEW NEEDED — Potential gaps detected (missing sub-sections, QRT references, or advisory items). Check warnings and address as applicable.
- NON-COMPLIANT — Mandatory chapters missing, QRT references absent, or ratio arithmetic errors found. Address all errors before submission.
The tools do not replace actuarial or legal review — they serve as automated quality gates for structural completeness and arithmetic consistency. Final compliance must be confirmed by the undertaking’s governance bodies and, where applicable, by the appointed actuary or external auditor.