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Matching Adjustment

This Working Party will consider the management of Matching Adjustment portfolios as a measure approved by PRA under Solvency II, but whose subsequent management is not laid down in all areas. The sums involved are very material but aspects of the future management and fluctuation in the measure is unclear.

Key objectives:

Below are the current objectives of the Matching Adjustment (MA) Working Party. These will necessarily be adapted in light of developments in regulation and industry practices.

  • Can the IFoA provide guidance on how new assets should be treated for MA purposes – other than by individual application by all MA holders to the PRA
  • MA portfolios over time develop more complex excesses of assets, and/or need for replenishment as new business flows and assumptions change. What is a rational approach to this, their management, extraction, or timely reassessment?
  • Under plausible changes how do the three PRA matching tests perform, and should there be wider limits, or timescales for action, over those tests to avoid volatile and costly micromanagement across a year?
  • Are there more pragmatic ways to treat reassurance (as an asset) and separation of collateral arrangements for MA portfolios?
  • How speedily do fresh insurance assumptions (updating a longevity table say) need application to avoid undermining MA portfolio compliance with PRA matching tests – particularly at the financial year-end?
  • The nature of fundamental spreads (FS) and how approved internal models (and the Standard Formula) interact with the FS in order to appropriately capture the risks retained by a firm. How might firms manage this distinction in their profit and loss attribution?
  • What monitoring would be deemed suitable to inform the governance functions in the entity holding the MA approval?

Key outputs:

Chair: Ross Evans
Membership: 8
Established: 2016

 

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Contact Details

If you want more information about this research working party please contact the Communities Team.

professional.communities@actuaries.org.uk

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  • CILA 2022

    23 May 2022 - 24 May 2022

    Spaces available

    We continue to live in a world of global uncertainty. Survival depends on our ability to simultaneously navigate through the diverse root-causes, ranging from: the consequences of Climate Change; transitioning to Net Zero; increased inflationary pressures and supply chain issues; to self-imposed changes in regulatory requirements. CILA 2022 focuses on these challenges to ensure we continue to be informed and remain battle ready, as well as showcasing highlights of recent CMI outputs.

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    In the spirit of fostering the IFoA’s vibrant, global community and enabling our members to participate, we have decided to hold our AGM virtually again this year. This allows for greater accessibility to this important annual event, and for greater accountability of our organisation.

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  • The IFoA Conference 2022

    133 Houndsditch, London EC3A 7BX and Online
    22 June 2022 - 23 June 2022
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    We’re delighted to welcome you back to our first in-person conference since early 2020, also being delivered virtually in our first-ever hybrid event. The theme of our inaugural two-day conference is ‘Focusing on tomorrow’s actuary’ and will explore the contribution actuarial science is making to some of tomorrow’s biggest issues.