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:
- Fundamental Spreads and the Matching Adjustment in light of the HMT review of the Solvency II regime for UK firms, July 2022
- Paper, Fixity of cash flows, December 2021
- Paper, Challenges for insurers running Matching Adjustment portfolios, July 2020
- Presentation at Life Conference 2018
- Presentation at Life Conference 2016
- Presentation at Pensions, Risk & Investment Conference 2017
- Presentation at Chief Actuaries Seminar 2017
- Support drafting of IFoA response to CP21/17
- Support drafting of IFoA response to CP24/17
- Produce paper to summarise five or six of the areas of the MA framework which are posing challenges for firms, and to provide some high-level thoughts and guidance for firms on each of these
| Chair: | Ross Evans |
|---|---|
| Membership: | 8 |
| Established: | 2016 |
Related documents
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Guidance for Member-Led Research Working Parties
9 November 2017
Contact Details
If you want more information about this research working party please contact the Communities Team.
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