The Bank of England’s Prudential Regulation Authority (PRA) has finalised its changes to the Solvency II regulation.
Policy Statement 10/24, issued yesterday, revolves around the changes to the matching adjustment (MA) component of the regulation; these changes broaden the assets that qualify for inclusion in MA portfolios.
The UK government is looking to direct capital into productive assets, and it will hope that the new regulations encourage insurers to invest accordingly. It’s unlikely that this will be a quick win, however.
“Today’s announcement has confirmed that there will be increased flexibility in the type of assets that insurers can invest in,” said Nick Ford, Partner, Head of Risk & Capital at Hymans Robertson.
“However, it will take time to significantly increase flows into these newly permitted assets and there will still be asset classes, such as some infrastructure funds that pension schemes currently hold, that they will find very challenging to include in their portfolios.
“Expecting that, insurers have already engaged with the PRA to explore suggestions on further reform to accelerate these moves and deliver the extra investment that the government is seeking,” Ford added.