In this workout, we've been asked to calculate whether the insurance company has adequate levels of capital, given the information below and we've been given various bits of information about the components of own funds as well as the solvency capital requirement. Now, let's have a look at those in a bit more detail. We start off with the excess of assets over liabilities and that's the shareholder's equity of the company on a solvency two basis. So it's after we've adjusted for all the asset and liability values for market value and after we've excluded the intangible assets DAC assets and deferred tax assets then we've also been given subordinated debt. So we can simply sum both of these together and that will give us the own funds and that's 16,000 in this example. Now, in terms of the solvency capital requirement we've been given that by risk, and that's very typical of how insurance companies disclose this because it allows to see the extent to which the different types of risk impact on the stress valuation of the assets and liabilities. And you can see here that the financial risk component that's the market risk component is the largest of these, and that's very typical. Now, there's one other thing that requires a little bit of explanation here and that's the diversification adjustment which is a deduction from the solvency capital requirement. And that reflects the fact that the regulators acknowledge that insurance companies with a very good spread of investments and activities are protected somewhat from some of the risks above. So they're allowed a deduction for this. And this adjustment is based on a standardized formula that depends on the amount of correlation for each of the risk components and the different insurance activities. So the less correlated these activities are, the more diversified the business is and therefore the larger the diversification benefit. Now, to calculate the solvency capital requirement we just need to sum all of these components together and that gives us a solvency capital requirement of 6,000. So our next step is to calculate the solvency ratio and that's very straightforward. We can just take our own funds from above and divide that by our solvency capital requirement. And that gives us solvency ratio of 266.7%, which is well in excess of the 100% minimum. So this company has no worries at all at this stage about its overall level of capital. Now, there is one more thing that we need to calculate and that is the tier one capital as a percentage of the solvency capital requirement. And that's because tier one capital must be more than 50% of the solvency capital requirement. And remember that tier one capital is the highest quality capital. So it's primarily the excess of assets over liabilities. So it excludes subordinated liabilities unless they are preference shares. Now in this example, we've not been given any information on the subordinated liabilities. So for prudence, we will just assume that these don't qualify as tier one capital. And we'll just take the excess of assets over liabilities of 8,000, and we'll divide that by our solvency capital requirement. And that gives us a ratio of 133.3%. So again, well in excess of the 50% minimum required. So this company has no concerns at all at the moment about its level of capital.