Prudential Regulation Authority Rulebook

1.1

This statement of policy (SoP) sets out the PRA’s approach to granting regulatory permissions in relation to the matching adjustment (MA), as well as variations to those permissions, and the circumstances in which the PRA may take the decision to revoke a firm’s MA permission. It also sets out how the PRA will assess the ongoing performance of the MA permissions framework.

1.2

When granting MA permissions, the PRA would exercise its powers under section 138BA (s138BA) of the Financial Services and Markets Act 2000 (FSMA), which would have the effect of waiving or modifying the PRA’s rules on the calculation of technical provisions to allow a firm to apply the MA in accordance with regulation 4(1) of The Insurance and Reinsurance Undertakings (Prudential Requirements) Regulations 2023 (referred to here as the 'IRPR regulations'). Using the same powers under FSMA, the PRA may also vary a firm’s permission to use the MA, such as to allow assets with new features into an MA portfolio. The PRA may also use these powers to revoke a firm’s MA permission(s).

1.3

This statement is relevant to:

• all UK Solvency II firms;
• the Society of Lloyd’s and its members and managing agents; and
• insurance and reinsurance undertakings that have a UK branch (third country branch undertakings),

where they are applying, or are seeking permission to apply, the MA. This SoP will refer to these collectively as ‘firms’.

1.4

This SoP should be read in conjunction with the IRPR regulations, the Matching Adjustment Part of the PRA Rulebook, the Investments Part of the PRA Rulebook, the relevant rules in the rest of the Solvency II Sector of the PRA Rulebook, supervisory statement (SS) 7/18 – Solvency II: Matching adjustment^[1], SS1/20 – Solvency II: Prudent Person Principle^[2], SS8/18 – Solvency II: Internal models – modelling of the matching adjustment^[3], SS3/17 – Solvency II: Illiquid unrated assets^[4] and the PRA’s insurance approach document.^[5] For information about making an application, see the Authorisations page of the PRA’s website.