1.1 In this supervisory statement (SS), the Prudential Regulation Authority (PRA) sets out its expectations of firms in respect of application of the matching adjustment (MA). The MA allows firms to adjust the relevant risk-free interest rate term structure for the calculation of a best estimate of a portfolio of eligible insurance obligations.
1.2 The scope of this SS includes:
• the assumptions underlying the MA;
• the assessment of eligibility for assets and liabilities;
• demonstrating compliance with the MA eligibility criteria for matching;
• calculation of the MA and attestation to the appropriateness of the MA benefit being claimed;
• ongoing management and compliance of MA portfolios;
• applications for MA permission and subsequent changes to an MA portfolio; and
• the implication of changes to the MA portfolio that are outside the scope of an existing MA permission.
1.3 This SS is relevant to all UK Solvency II firms and the Society of Lloyd’s and its managing
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