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Matching Adjustments

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:

  • 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
  • The opening MA portfolios will 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? (Acknowledging some of this will have been covered in MA applications to the PRA).
  • 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 EIOPA driven fundamental spreads (FS) are anticipated to be quite stable other than in extreme conditions. Approved internal models (and the Standard Formula) anticipate quite sharp moves by assuming a material part of any spread widening to be subsumed in the FS.  How might firms manage this contradiction 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 Objectives:

Chair: Ross Evans
Membership: 7
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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  • Autumn Lecture 2020: Professor Elroy Dimson

    Online webinar
    14 October 2020

    Spaces available

    Many individuals and institutions have a long-term focus, and invest funds for the benefit of future generations. Their strategy should reflect their long horizon. University endowments are one of the oldest classes of institutional investor, and I will present the first study of the management of these endowments over the very long term.

  • GIRO Conference 2020 Webinar Series

    Available to watch globally in November.
    02-13 November 2020
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    This year's GIRO has been re-designed as a virtual conference to offer members and non-members the opportunity to get up to date content from leading experts in the general insurance field via online webinars. All sessions will be recorded and made available to purchase and re-watch post-event on the IFoA's GI Online Learning Resource area.

  • Life Conference 2020 Webinar Series

    Online
    16 November 2020 - 27 November 2020

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    This year's Life Conference has been re-designed as a virtual conference to offer members and non-members the opportunity to get up to date content from leading experts in the life insurance field via online webinars. All sessions will be recorded and made available to purchase and re-watch post-event on the IFoA's website.

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    Cash-flow driven investing is a game-changer for DB pension funds navigating their end-game. Suitable for sponsors who want to reduce risks on their balance sheets. And for trustees, it shifts the focus to providing greater certainty of returns, managing funding level volatility and ensuring they have enough income to pay cash-flow requirements.

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