Sorry to have been quiet recently. The reason is a number of projects which are under confidentiality restraints. Much as we dislike the whole concept of ‘confidentiality’, i.e. secrecy, it is the price for being involved at all.
However this call for evidence from HMT is too good to ignore. As InsuranceERM reports:
Matching adjustment
The matching adjustment (MA) is a vital contributor to a strong Solvency II capital position among UK life insurers, adding close to £70bn of capital to solvency balance sheets.
It is, however, very restrictive in terms of the types of liabilities and assets that qualify – and the UK is looking at the possibility of loosening that. The MA also requires the regulator to operate a strict approval process, which the government is also seeking to ease.
The restrictive rules have produced unintended consequences, the UK says. For example, the PRA has allowed firms to restructure, via securitisation, assets such as equity-release mortgages that would not otherwise qualify for MA inclusion. However, the regulator dislikes the additional complexity this introduces, and the fact that it is costly and is a barrier to its use by smaller firms.
You couldn’t make it up.