Capital roles: MCT, LICAT and internal scenarios answer different questions
Canadian insurance capital work starts with the correct legal entity and framework. OSFI’s MCT is a P&C framework; LICAT is a life framework. Provincial requirements must be checked separately. Neither acronym is a generic solvency ratio for every insurer.
What an analyst produces
A capital team may reconcile eligible capital, validate risk exposures, calculate requirements, explain period-to-period movements and project the effect of business plans or stress scenarios. Inputs can come from finance, valuation, investments and reinsurance.
Original MCT-style ratio illustration
If capital available is 250 and minimum capital required is 100, the ratio is 250%. If a stress lowers available capital to 220 and raises the requirement to 110, it becomes 200%. Changing the numerator alone would miss part of the effect.
This is a simplified ratio exercise, not a capital calculation or a statement about an acceptable operating target. LICAT has its own numerator and base solvency buffer construction; do not reuse the toy MCT formula as a LICAT formula.
Why scenarios matter
A regulatory calculation gives one specified measure. Internal assessment also asks how capital evolves under the firm’s actual risks, strategy and management actions. Show timing, dependencies and whether proposed actions are feasible during stress.
Routine reporting has a calendar. Capital planning and scenario redesign require project coordination across several teams.
Reading sources
ActNet editorial guide · October 1, 2026 · Original illustrative examples.