Capital Management
Last updated
Last updated
While Pramb is not a traditional insurer, we are committed to adopting the highest capital management standards to protect our users and ensure the sustainability of our platform. We have modeled our capital management approach after the Solvency II framework, a prudential regime for insurance undertakings in the EU. Solvency II sets out the requirements applicable to insurance and reinsurance companies to ensure adequate protection for policyholders and beneficiaries.
At its core, Solvency II adopts an economic risk-based approach that assesses the "overall solvency" of undertakings through quantitative and qualitative measures. The assessment includes the undertakings' risk profiles, managing risks, whether the right incentives for sound risk management practices and transparency are in place, etc.
There are different tiers of capital requirements under Solvency II, namely the Solvency Capital Requirement (SCR) and Minimum Capital Requirement (MCR). SCR refers to the capital required to ensure that the undertaking will be able to meet its obligations over the next 12 months with a probability of at least 99.5%. MCR refers to the capital required by the undertaking to meet its obligations over the next 12 months with a probability of at least 85% and is range-bound between 25% and 45% of SCR. SCR and MCR can be regarded as "soft" and "hard" floors.
The capital pool is the foundation of Pramb's protection capabilities. It is built from funds accumulated through underwriting capital, cover payments, and investment returns.
The SCR is the minimum amount of capital Pramb must hold to ensure we can meet our obligations over the next 12 months with a 99.5% probability. This limits the possibility of financial ruin to less than once in 200 cases.
Pramb calculates SCR daily, considering factors such as:
Active covers
Outstanding claims
Potential incurred but not reported claims
Market currency shock risk
Operational risk
The SCR% is the ratio of available capital to the SCR. It measures Pramb's financial strength and ability to cover potential claims and risks.
A higher SCR% indicates greater financial strength and a lower risk of insolvency.
The minimum acceptable SCR% is 100%.
You can find the real-time SCR% on Pramb's data page.
The CER% measures the ratio of active cover amount to the capital pool size, indicating how efficiently Pramb is using its capital to generate income.
A higher CER% means the company is increasing the productivity of its assets to generate income.
The desirable ratio is between 100% and 300% to balance high productivity with moderate risk exposure.
The real-time CER% can be found on Pramb's data page.
Don't Risk It, Insure It.
Pramb's robust capital management approach ensures that we are well-capitalized to protect your DeFi investments and maintain the long-term sustainability of our platform.
