Following the introduction of Solvency 2 in January 2016, PRA has launched the first of a series of consultation papers on reform to the implementation of Solvency 2. The series begins with a paper on the Matching Adjustment (MA) and sets out PRA’s proposed expectations of firms in this area. PRA has worked closely with ABI in developing these measures.
The MA allows firms to adjust the relevant risk-free interest rate term structure for the calculation of a best estimate of a portfolio of eligible insurance obligations. The consultation paper is relevant to all UK Solvency 2 firms and to the Society of Lloyd’s and its managing agents where they are applying or have applied to use the MA. The paper also consolidates and updates material previously published in Directors’ letters.
The consultation closes on 31 January 2018. Consultation papers on the model change process (December 2017) an Reporting (January 2018) are to follow.