PRA launches consultation to accelerate insurer investment in the UK

By Ryan Hewlett

April 8 - (The Insurer) – The UK’s Prudential Regulatory Authority (PRA) launched a consultation on Tuesday aiming to help insurers accelerate investment in the country, as part of continued efforts to prioritise economic growth under government pressure.

The PRA, the Bank of England’s regulatory arm, has proposed fresh rules to reform the so-called matching adjustment, which it said would aim to reduce barriers to “rapid investment” by insurance firms.

This will be achieved by the launch of a new Matching Adjustment Investment Accelerator (MAIA) permission.

Under the proposals, firms with an MAIA permission will have 24 months to submit a formal MA application on eligible assets with new features, reducing the risk that firms miss out on time-sensitive investment opportunities.

It will help support the PRA’s secondary objective to facilitate greater international competitiveness and growth of the UK economy, the PRA said.

Sam Woods, deputy governor for Prudential Regulation and CEO of the PRA, said: "This innovation will enable insurers to make more rapid investment decisions and support growth in the UK economy, while protecting policyholders."

Woods first trailed the move in a January evidence hearing in front of the House of Lords financial services regulation committee. He told the committee at the time that the proposals would allow insurers to invest in a wider range of assets without securing the Bank’s approval first.

The MA has been a key area of contention and debate during discussions about UK Solvency II reforms. It allows insurers to recognise upfront a proportion of the investment return that they are confident they will earn on the assets that are held against their long-term insurance liabilities.

Responding to the consultation, David Bartlett, counsel at global law firm Norton Rose Fulbright, said that harnessing insurance capital for productive investments is a “key pillar” of the UK government's growth agenda.

“Last year's reform of the matching adjustment increased insurers' investment flexibility by broadening the range of eligible assets while retaining regulatory capital benefits. The PRA saw this as a big step towards supporting the government’s plans for growth,” said Bartlett.

“These new measures now allow firms with accelerator permissions to self-assess asset eligibility up to pre-approved limits before obtaining full approval. This will help to address industry concerns over the matching adjustment approvals process being too cumbersome to allow firms to react to new investment opportunities.”