The Prudential Regulation Authority (PRA) has initiated a consultation on proposed reforms to the Matching Adjustment (MA) regime, aimed at enhancing insurers’ ability to invest more swiftly in the UK economy. The key element of the reform is the introduction of a Matching Adjustment Investment Accelerator (MAIA), designed to allow insurers to temporarily access MA benefits before obtaining full regulatory approval.
Under the proposed changes, insurers could apply for an MAIA permission, granting them a 24-month window to submit a formal MA application for eligible assets with new features. This initiative is intended to provide greater flexibility for insurers when responding to time-sensitive investment opportunities, such as infrastructure and long-term projects, which may otherwise be missed due to the current approval process.
The PRA emphasized that these reforms are in line with its secondary objective to foster international competitiveness and growth, while ensuring the protection of policyholders. The regulator also clarified that insurers would still need to meet specific eligibility criteria, and all assets under the MAIA would eventually be subject to full assessment.
Sam Woods, Deputy Governor for Prudential Regulation and CEO of the PRA, explained that the aim of the initiative is to facilitate quicker investment decisions by insurers, thereby contributing to economic growth in the UK, without compromising policyholder protection.
The MA regime allows insurers to discount their liability cash flows at a rate higher than the basic risk-free rate when supported by appropriate long-term assets, leading to a lower reported value of liabilities. By granting earlier access to MA benefits through the MAIA, firms would be able to unlock capital more quickly for reinvestment.
The consultation document also outlines operational details, including the application process, oversight requirements, and proposed limits on the proportion of MAIA assets that can be included in an overall MA portfolio. These measures aim to strike a balance between prudent risk management and expanding investment capacity.
Ewen Tweedie, Actuarial Director at insurance consultancy Broadstone, commented that the MAIA could streamline insurers’ decision-making processes by allowing immediate access to MA benefits, with full PRA approval to follow within two years. He also highlighted the inclusion of asset limits within the MA portfolio as a safeguard to manage risk while expanding investment flexibility. Tweedie noted that the consultation reflects a broader regulatory shift aimed at unlocking additional insurance sector capital for economic and infrastructure development in the UK.
The proposed reforms are expected to attract interest from insurers already utilizing the MA regime, as well as those considering its use in the future. The consultation period will close on July 16, 2025.
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