Untangling complexity: A step-by-step guide to crafting optimal portfolios under the Matching Adjustment (2024 edition)

In our 2024 edition, we provide insight into the proposed MA reforms and the key areas in which this will impact insurers from an investment and reporting perspective.

The UK bulk annuity market is uniquely positioned within the UK Solvency II regulated market operating under the Matching Adjustment. This provides life insurers with the ability to invest in matching portfolios containing long dated spread assets without generating significant capital charges and with minimal volatility in their own funds. The MA is complex and our intention is to provide clarity and precision to the regulatory requirements which can be challenging to comprehend, especially for those new to the industry.

This paper provides a detailed overview of all the key topics that are relevant to managing the assets of Matching Adjustment portfolios with a particular focus on developing efficient MA portfolios through the global fixed income markets. This is particularly important in the context of the current levels of growth in the pension risk transfer market and the lack of diversification offered by UK fixed income.

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