Prudential Regulation Authority Rulebook

13.1

This Chapter applies to a firm that has been granted a matching adjustment permission.

13.2

A firm with a matching adjustment permission must comply with the matching adjustment eligibility conditions and the terms of its matching adjustment permission, including any applicable exposure limits, at all times.

13.3

A firm that applies the matching adjustment to a relevant portfolio of insurance or reinsurance obligations must not apply a risk-free interest rate transitional measure or volatility adjustment in respect of those obligations.

13.4

Where a firm that applies the matching adjustment is no longer able to comply with the matching adjustment eligibility conditions, it must immediately:

1. (1) inform the PRA; and
2. (2) take the necessary measures to restore compliance with these conditions as soon as possible.

13.5

Where a firm is not able to restore compliance with the matching adjustment eligibility conditions within two months of the date of non-compliance it must then, on a monthly basis and for the duration of the period of non-compliance, adjust the matching adjustment it applies in respect of the relevant portfolio of insurance or reinsurance obligations according to the following formula:

\[\mathrm{MA^{*}=MA-\left ( n-1 \right )\times p\times max\left \{ MA,0 \right \}}\]

where:

MA^* is the reduced matching adjustment applied to the relevant portfolio of insurance or reinsurance obligations;

MA is the matching adjustment, where the matching adjustment is calculated assuming no restrictions relating to the breach of matching adjustment eligibility conditions;

n is the whole number of months since the date of non-compliance, and shall not be greater than 11; and

p is 10%.