The amount of own funds a company judges necessary for its own risk appetite, distinct from regulatory capital, computed on its own horizon and threshold.
Regulatory capital answers a question the supervisor asks: what amount ensures obligations are met with 99.5% probability over one year. Economic capital answers the question management asks: what amount lets the company keep its commercial promise, hold its target rating, and ride out a cycle without raising equity at the worst moment. The two almost always differ, and the nature of the gap is informative. An insurer targeting an A rating from an agency often calibrates beyond the 99.5th percentile, sometimes at 99.9%, and over a multiyear rather than annual horizon, because the threat it faces is downgrade, not ruin. It also accounts for risks the standard formula ignores: strategic risk, reputation risk, liquidity risk. ORSA is the regulatory place where the gap between the two figures must be explained, and where never having one becomes the anomaly.
Midsize European non-life insurer, 2026 ORSA. Standard formula SCR 480M EUR, coverage ratio 172%. Internal economic capital calibrated at 99.7% over three years and including 40M EUR of strategic risk: 605M EUR. Management steers to an internal target ratio of 140% of that latter figure, that is 847M EUR of own funds, which explains why a dividend can be refused while the regulatory ratio looks comfortable.
economic capital, capital interne, capital cible interne, besoin global de solvabilité