Solvency II: Matching adjustment - illiquid unrated assets and equity release mortgages

Supervisory Statement 3/17

Update 27 September 2019
This SS was updated following Policy Statement 19/19 ‘Solvency II: Equity release mortgages – Part 2’. The expectations set out in the updated SS3/17 will come into effect on Tuesday 31 December 2019, and will supersede the version of SS3/17 published in December 2018 that was due to come into effect on the same date.

Update 10 December 2018
This SS was updated following Policy Statement 31/18 ‘Solvency II: Equity release mortgages’. The expectations in the SS come into effect on 31 December 2019 (see future version below).

Update 4 July 2018
This SS has been updated to reflect changes in terminology as a result of the publication of Policy Statement 15/18 ‘Strengthening individual accountability in insurance: Extension of the Senior Managers and Certification Regime to insurers’


This supervisory statement (SS) sets out the PRA’s expectations in respect of firms investing in illiquid, unrated assets within their Solvency II matching adjustment (MA) portfolios. It is relevant to life insurance and reinsurance companies holding or intending to hold unrated assets (including restructured equity release mortgages (ERMs)) in an MA portfolio.

This statement should be read in conjunction with Chapters 6 and 7 of the Technical Provisions Part of the PRA Rulebook. 

Chapter 2 of this SS clarifies the PRA’s expectations where internal credit assessments are used as part of determining the fundamental spread (FS), including expectations that are specific to restructured assets (including ERMs). Chapter 3 then sets out principles to be applied when assessing the risks from guarantees embedded within ERMs, for the purposes of verifying the appropriateness of the FS for restructured ERM notes.

Current version

Published: 27 September 2019

Updated following Policy Statement 19/19 Solvency II: Equity release mortgages - Part 2

Effective from: 31 December 2019

Past versions

Published: 4 July 2018

Published: 10 December 2018

Updated following Policy Statement 31/18 ‘Solvency II: Equity release mortgages'

Effective from: 31 December 2019 (superseded by September 2019 version on 27 September 2019).

Published: 5 July 2017

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