SII’s MA should allow assets with ‘predictable’ returns rather than just ‘fixed’ - ABI

Written by Adam Cadle

14/09/2021

Solvency II’s Matching Adjustment (MA) provisions should allow assets with ‘predictable returns’ rather than just ‘fixed returns’, ABI director of regulation Charlotte Clark has said.

Speaking at a Treasury Committee meeting this week on the future of financial services, Clark stated: “It is about how you can invest and incentivise investment beyond the economic cycle that is the crucial part of the reform.

“We should be looking at higher discount rates or more in terms of the sorts of assets allowed within that matching adjustment. Some of the infrastructure assets have predictable returns that may not be fixed. Assets with fixed returns consist of corporate bonds and government bonds. Investing in more illiquid assets may not have that precise definition.”

On the issue of the risk margin, Clark said it is “too volatile” and “too large” in a low interest rate environment.

“It is about how you change that to make sure capital is not being used unproductively.”

Related Articles