On transition to Solvency II, the principal change compared with the
previous rules is the calculation of SCR (solvency capital requirement). In
addition, a profit margin must be included in the calculation of capital base.
By profit margin is meant a component of the value of an insurance or
investment contract representing the present value of the company's future
profit on the contract.
The value is recognised in the income statement as the
company provides insurance cover and any other benefits under the contract. The
increase in the capital base is partially matched by an increased solvency