Insurance update

The Matching Adjustment Investment Accelerator

Overview

On 8 April 2025, the PRA published a consultation paper (CP7/25) proposing the introduction of a new framework, referred to as the “Matching Adjustment Investment Accelerator (MAIA)”. The MAIA is intended to facilitate firms taking advantage of certain investment opportunities more quickly by allowing them to include MA eligible assets with new features in their MA portfolio without needing to apply first to vary the scope of their MA permission.

In the consultation, the PRA states that it expects the effects of the reform to “promote growth in the UK insurance sector and broader economy”. The potential introduction of a MAIA had been trailed in Sam Woods’ letter to the Prime Minister in January 2025, where he stated that “This innovation would reduce barriers to investment by insurance firms, enabling them to deliver more quickly on their commitments to make additional investments in the UK and so support economic growth”.

The consultation period ends on 4 June 2025. The PRA expects that the proposals could be implemented in Q4 2025 (apart from any consequential changes to the Matching Adjustment Asset and Liability Information Return (MALIR), which would take effect from 31 December 2026).

Rationale for the reform

In the consultation paper, the PRA reports that participants in a Subject Expert Group which met between March and July 2024 stated that they were unable to invest in certain assets that they considered to be MA eligible for inclusion in the MA portfolio under the PRA’s rules. This was due to investment windows being shorter than the time expected to be required to vary MA permissions to include such assets with new features (which can take up to six months). Although the PRA has worked on reducing decision times for MA permission applications following reforms to UK Solvency II, the process can still be longer than the investment window opportunity.

In its Cost Benefit Analysis, the PRA estimates that across the annuity sector c.£10 billion could be invested using MAIA permissions at any one time if fully utilised (although this will very much depend on how the sector responds to the changes). The PRA does acknowledge that there is uncertainty about how much of this would be invested in UK productive assets.

Firms applying for a MAIA permission will need to establish suitable procedures and controls, including maintaining a MAIA policy and having in place contingency plans for each MAIA asset to be followed if the asset is ultimately determined not to be MA eligible. This is intended to reduce the risk of disorderly sales of ineligible assets.

Firms will also be required to propose an appropriate MAIA exposure limit as part of the application. The starting expectation is that an appropriate MAIA exposure limit (applied on a group basis) would be the lower of:

• 5% of the best estimate of the liabilities of the MA portfolio (net of reinsurance); and
• an amount proposed by the firm which is no greater than £2 billion.

The PRA plans to amend SS7/18 (Solvency II: Matching adjustment) to set out expectations in respect of MAIA policies. This includes policies in respect of governance and oversight, intended use of the MAIA permission, establishment and review of contingency plans, and the MAIA risk appetite framework.

Other requirements will include:

• firms would need to apply for variation of the MA permission within 24 months of inclusion of the MAIA assets in the MA portfolio;
• firms would be required to update relevant policies (including the liquidity plan) to consider the risk that MAIA assets are ultimately determined not to be MA eligible, and therefore need to be removed from the MA portfolio; and
• there would be new reporting requirements of a “MAIA use report” and changes to the MALIR.

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