PS17/25 – Matching Adjustment Investment Accelerator

1: Overview

1.1 This Prudential Regulation Authority (PRA) policy statement (PS) provides feedback to responses the PRA received to consultation paper (CP) 7/25 Matching Adjustment Investment Accelerator (MAIA).

1.2 The MAIA is a significant development in the approach to the Matching Adjustment (MA) in the UK. The PRA considers that the introduction of the MAIA framework will reduce barriers to timely and capital-efficient investment by insurers, including productive investments in the UK. The policies set out in this PS are important examples of the PRA’s advancement of its secondary objective of facilitating the international competitiveness and growth of the UK economy, while continuing to advance its primary objectives of promoting the safety and soundness of firms and contributing to the securing of an appropriate level of protection for policyholders.

1.3 CP7/25 proposed that firms that use the MA could apply for a MAIA permission.^{footnote [1]} This would allow them to include within their MA portfolio, a limited quantity of self-assessed MA eligible or ‘MAIA assets’ i.e. assets with features not covered by their existing MA permission. The MA benefit on these ‘MAIA assets’ could be claimed immediately.^{footnote [2]} Firms would then have 24 months to submit an MA application to regularise MAIA assets during which time they would continue to benefit from the MA capital treatment.^{footnote [3]}

1.4 This PS also contains the PRA’s final policy as follows:

• amendments to the Matching Adjustment Part of the PRA Rulebook (Appendix 1);
• amendments to the Reporting Part of the PRA Rulebook (Appendix 2);
• updated supervisory statement (SS) – SS7/18 – Solvency II: Matching Adjustment (Appendix 3);
• updated SS8/18 – Solvency II: Internal Models Modelling of Matching Adjustment (Appendix 4);
• updated SS5/24 – Funded Reinsurance (Appendix 5);
• updated Statement of Policy (SoP8/24) – Matching Adjustment Permissions and Matching Adjustment Investment Accelerator Permissions (Appendix 6);^{footnote [4]}
• updated MALIR instructions (Appendix 7);
• updated MALIR template (Appendix 8);
• updated Matching Adjustment supplementary information form (Appendix 9); and
• a new Matching Adjustment Investment Accelerator supplementary information form (Appendix 10).

1.5 This PS is relevant to firms that currently have an MA permission, or those that may seek an MA permission in the future.

Summary of responses

1.6 The PRA received nine responses to the CP. The names of respondents to the CP who consented to their names being published are set out at Appendix 11.

1.7 Respondents were in general supportive of the PRA’s proposals in CP7/25. Eight of the nine respondents explicitly noted that the MAIA framework has the potential to speed up investment in MA eligible assets and to streamline the MA permission process, thereby benefiting firms who write annuity business.

1.8 Responses therefore mainly related to the details of the policy which are discussed further in Chapter 2, rather than the overall structure of the MAIA framework. Key themes included:

• Concerns that the proposed paragraph 10.8 in SS7/18 could unduly restrict the scope and flexibility of the MAIA framework by excluding certain asset types, such as complex derivatives and internally restructured assets. They noted that this could limit the benefits of the MAIA framework and requested greater clarity, along with a more principles-based approach in assessing asset suitability.
• Suggestions that, as part of contingency planning, in response to a determination by the PRA that the asset is ineligible for inclusion in the MA portfolio firms should not be restricted from relying on selling assets in the short to medium term – particularly where those assets can be traded in a deep and liquid secondary market.
• Suggestions that the exposure limit of the MAIA permission should be risk-based, the £2billion limit removed, or firms should have bespoke limits tailored for each firm.
• Views that the time limit for regularisation should be longer. Also, rather than the time limit being linked to the submission of an MA application it should be linked to entering the Application Readiness Assessment Process (ARAP).
• Concerns that the PRA’s proposed timing for the MAIA use report would increase the burden on firms’ year-end processes, as the submission deadline would coincide with other regulatory reporting requirements.
• Concerns that the proposed changes to SS5/24 – specifically the expectation that firms should not assume recapture of assets outside their MA permission via a MAIA permission – could hinder intra group reinsurance arrangements. Respondents suggested allowing an assumption of recapture into the MA portfolio using a MAIA permission where assets are held in another MA portfolio within the same group.

1.9 In addition, respondents made observations and requests for minor clarifications which have also been set out in Chapter 2.

Changes to draft policy

1.10 The PRA is grateful for the responses to CP7/25. The PRA has identified a number of areas where adjustments have been made to the draft policy in the light of the responses received. The most material changes include:

• an amendment to the Matching Adjustment Part of the PRA Rulebook paragraph 19.2(2) stating that the MAIA use report must be submitted to the PRA annually, no later than 18 weeks after the firm’s financial year-end. This was previously proposed as 14 weeks in CP7/25.
• amendments to SS7/18 to make the expectations in respect of MAIA policy less restrictive and more proportionate. These include changes to paragraph 10.5 to reflect that firms are expected to apply a proportionate and risk-based approach to assessing asset eligibility. This means undertaking more in-depth assessment for assets where greater judgement is required in completing an assessment of eligibility. This replaces the previously proposed more prescriptive expectations in the draft SS7/18 paragraph 10.8.
• amendments to SS7/18 paragraph 10.10 on contingency plans to modify the proposed expectation that, in response to a determination by the PRA that a MAIA asset is not MA eligible, firms’ contingency plans should not assume a sale of the asset in the short- or medium-term. This has been replaced by an expectation that firms’ contingency plans should not assume an ‘immediate’ sale of the asset; and an expectation that contingency plans should cover how the firm expects to continue to invest in that asset when outside the MA portfolio in the event that it needed to be removed.
• amendment to SS5/24 paragraphs 2.7A, 2.18 and 3.13A such that firms can assume recapture into the MA portfolio using its MAIA permission where the asset (1) is collateral in an intra group reinsurance arrangement; and (2) is the same as an asset included in the firm’s MA portfolio under a MAIA permission.^{footnote [5]}

1.11 Further details on issues raised in responses, and any related amendments to the policy, are set out in Chapter 2: Feedback to responses. The PRA considers the changes made to the policy are appropriate and improve the final rules and final policy materials, in a manner that aligns with the PRA’s statutory objectives.

1.12 Where the final rules or Technical Standards differ from the draft in the CP in a way which is, in the opinion of the PRA, significant the Financial Services and Market Act 2000 (FSMA) requires the PRA to publish:^{footnote [6]}

• details of the differences together with an updated cost benefit analysis;
• a statement setting out in the PRA’s opinion whether or not the impact of the final rules on mutuals is significantly different from: the impact that the draft rule would have had on mutuals; or the impact that the final rule will have on other PRA-authorised firms.

1.13 The PRA considers the costs and benefits of the final rules and final policy in this PS do not significantly differ overall from those derived from the draft policy proposed in CP7/25 presented in Chapter 3 (section: Costs of the proposal and Benefits of the proposal). The PRA notes that firms may have some cost reductions as a result of the longer reporting deadline for the MAIA use report. The PRA also expects that the changes to make the expectations on MAIA policies to be less restrictive and more proportionate may increase firms’ use of their MAIA permissions.

1.14 The PRA considers that the final rules do not differ from the draft rules in a way that requires reassessment of the impact of the policy on mutuals.

1.15 When making rules, the PRA is required to comply with several legal obligations. In CP7/25, the PRA published its explanation of why the rules proposed by the CP were compatible with its objectives and with its duty to ‘have regard’ to the regulatory principles. In Chapter 3 (section: ‘Have regards’ analysis’) of CP7/25, the PRA explained how it had regard to the most relevant of these matters in relation to the proposed policy and rules. The PRA considers that its analysis of its ‘have regards’ in CP7/25 remains appropriate in light of the changes made to the draft policy proposed.

Implementation

1.16 The final rules and policy material set out in this PS will take effect on 27 October 2025; except for the changes to the Matching Adjustment Asset and Liability Information Return (MALIR) template which will be implemented from 31 December 2026. Firms may apply for a MAIA permission from 27 October 2025.

2: Feedback to responses

2.1 Before making any proposed rules and/or policy, including SoP and SS, the PRA is required by Financial Services and Markets Act 2000 (FSMA) to have regard to any representations made to it in response to the consultation, and to publish an account, in general terms, of those representations and its feedback to them.^{footnote [7]}

2.2 The PRA has considered the representations received in response to CP7/25. This chapter sets out the PRA’s feedback to those responses, and its final decisions.

2.3 The sections in this chapter have been structured to broadly correspond to the structure of the CP, with some areas rearranged to better respond to related issues. The responses have been grouped into the following categories:

• The MAIA permission process;
• Scope and implementation of the MAIA permission;
• Implementing and maintaining a MAIA policy;
• MAIA contingency plans;
• Reporting of use of MAIA permission;
• MAIA exposure limits;
• MAIA time limits;
• Breaches of MAIA permission;
• Consequential impacts;
• Other responses; and
• Cost benefit analysis.

The MAIA permissions process

2.4 CP7/25 set out a proposed MAIA application process. In responses to the CP, the PRA received a number of requests for clarifications on this process. The PRA has made no change to the policy materials as a result, but comments on each response in turn below:

• One respondent sought clarity that only one s138BA application is required for a MAIA permission. The PRA confirms that this is correct.
• One respondent sought to clarify whether the PRA had provided an exhaustive list of materials that were requested to support initial MAIA applications. The PRA confirms that in the Matching Adjustment and Matching Adjustment Investment Accelerator Permission SoP8/24 paragraphs 2A.6 to 2A.8 provide the information that firms are expected to provide in support of applications. These paragraphs also outline the additional information that the PRA may consider requesting from a firm seeking an initial MAIA permission.
• One respondent asked for clarification on whether assets currently held outside an MA portfolio that contain features not yet covered by a firm’s MA permission, can be brought into the MA portfolio on the MAIA framework’s go‑live date, or if separate transitional arrangements will apply. The PRA confirms that such assets may only be included in the MA portfolio once a MAIA permission is granted, and subject to the new assets meeting the requirements of the firm’s MAIA permission.
• Two respondents queried whether the PRA would provide a timeframe for MAIA permission decisions. The PRA expectations are described in the Matching Adjustment and Matching Adjustment Investment Accelerator Permission SoP 8/24 paragraph 2A.15. Initial MAIA applications are expected to be reviewed promptly, provided sufficient information has been provided. MAIA variation applications that are linked to MA variation applications would be subject to the same review timeline as the MA variation application.
• One respondent sought clarity on whether the MAIA framework was expected to alter the circumstances in which an MA variation application would be required due to the inclusion of assets with new features. The PRA confirms this is not the case.
• One respondent sought to clarify paragraph 10.2 in the draft policy SS7/18, which notes that ‘it is expected that MAIA permissions can be used to facilitate investments that may contribute to increased productivity in the UK economy and transition to net zero.’ The respondent queried whether this phrasing reflects an expectation, and if so, then whether the PRA intends to assess MAIA applications against this criterion. The PRA notes that this potential benefit is considered as part of the PRA’s overall assessment of the Secondary Competitiveness and Growth Objective (SCGO) benefits of these proposals, but does not form part of the criteria for assessment of MAIA permission applications.

Scope and implementation of the MAIA permission

2.5 Additionally, the PRA received the following additional requests for clarification on the scope and implementation of the MAIA permission:

• One respondent sought to clarify that requirements relating to the MA attestation are unaffected by a MAIA permission. The PRA confirms this is the case that no changes to the MA attestation framework will be made upon implementation of the MAIA framework.
• One request was made for the PRA to publish anonymised data on MA portfolio assets. This proposal is outside of the scope of CP7/25.
• One respondent asked whether the PRA intended to publish a list of assets that will be newly eligible under the MAIA framework. The PRA notes that the MAIA framework does not alter the MA eligibility conditions, but provides firms with a MAIA permission with a quicker route to including eligible assets in the MA portfolio.
• One respondent sought to clarify that the MAIA framework is not limited to illiquid private assets. The PRA confirms that the MAIA framework is not limited to illiquid private assets. It applies to any asset type that includes new features which a firm considers MA eligible, but which are not currently covered by the firm’s existing MA permission.
• One respondent asked if new assets can be included in the MA portfolio using a MAIA permission while an MA application for assets that are already in the MA portfolio using a MAIA permission is being considered by the PRA. The PRA confirms that this is the case subject to exposure limit compliance.
• One respondent sought to clarify whether assets with ‘highly predictable’ (HP) cashflows can be included in the MA portfolio using the MAIA permission, even if such assets are not yet part of the firm’s MA authorisation. The PRA confirms that firms can include assets with HP cashflows in the MA portfolio using their MAIA permission, provided the firm is satisfied that they meet the MA eligibility criteria.

2.6 Separately the PRA has made changes to paragraph 2A.12 of SoP 8/24 to reference liquidity management arrangements rather than liquidity coverage ratios. This is reflective of the range of approaches to managing liquidity that exist for firms. The PRA has also made changes to paragraphs 1.2 and 2A.13 in SoP 8/24 to improve clarity.

2.7 The PRA has identified that there is an inconsistency between paragraphs 2.34 and 2A.17 in the draft SoP8/24 covering the situation where an MA application was refused. The PRA considers that the draft policy could have been too restrictive in these situations. The PRA has changed the draft policy to be consistent and in this situation the PRA would expect the firm to consider whether an update to the MAIA exposure limit is still required, or whether the related MAIA variation application should be withdrawn.

Implementing and maintaining a MAIA policy

2.8 In CP7/25 the PRA proposed an expectation in the draft SS7/18 at paragraph 10.8 that firms specify the intended use of the MAIA permission, in line with the investment policy for assets in the MA portfolio. This may include specifying criteria or asset features that would or would not be deemed appropriate for MAIA assets. The PRA received six responses in respect of these proposed expectations. Respondents viewed these to be restrictive and to introduce ambiguity to the MAIA framework, potentially leading to unnecessary confusion, delay and additional work for both firms and the PRA. Respondents commented that the paragraph could discourage innovation and investment in productive finance. Respondents argued that the risks the PRA sought to address are already controlled for by other aspects of the MAIA framework including contingency plans and exposure limits. The PRA has considered the detail of these responses and made changes to draft policy as set out in paragraphs 2.9 to 2.20.

2.9 Two respondents considered that short-dated assets should be suitable for inclusion in the MA portfolio using a MAIA permission, for example, where these are bought as part of a package of securities with the same features.

2.10 The PRA notes that the intention of this proposal was to ensure that firms do not routinely hold MAIA assets that would mature before the deadline for regularisation – and therefore might not be assessed for MA eligibility by the PRA prior to the asset maturing. However, the PRA considers that the risks to the PRA’s objectives of removing this expectation are low and so has decided to update the draft policy to remove the expectation that short-dated assets would be inappropriate for inclusion in the MA portfolio under a MAIA permission. The PRA has also set a new expectation in SS7/18 paragraph 10.16 that a firm’s long-term strategy should not be routinely supported by assets that use MAIA permission to remain in the MA portfolio only temporarily, without ever being regularised through an MA eligibility application. Therefore, the PRA expects firms to consider submitting an MA application in respect of MAIA assets that are removed from the MA portfolio or mature prior to the time limit for regularisation applying, where the firm expects to invest in assets with the same features in the future. The PRA considers this expectation also applies to MAIA assets with new features that expire before the time limit for regularisation applies, after which the asset(s) would be within the scope of the existing MA permission and would no longer be classified as a MAIA asset.

2.11 Four respondents commented on the proposed expectation that it would generally be inappropriate to include assets in the MA portfolio using a MAIA permission where the assessment of MA eligibility conditions is more complex. Respondents considered that the wording is vague and ambiguous. One respondent queried if a firm’s experience in managing an asset was a consideration. Three respondents considered the expectation that it would generally be inappropriate to include internally restructured assets to be unduly restrictive, as firms have greater flexibility in internal restructuring activities to ensure that an asset is MA eligible. They commented that this would reduce the take up of productive assets using the MAIA framework.

2.12 Having considered the responses; the PRA has amended the draft policy. The PRA considers that it is sufficient to specify that firms should apply a proportionate and risk-based approach to assessing asset eligibility. This means undertaking more in-depth assessment for assets where greater judgement is required in completing an assessment of eligibility. The PRA has amended SS7/18 paragraph 10.5 to include this expectation. As a result, the PRA considers that the expectations in the second bullet point in paragraph 10.8 are no longer needed, acknowledging the unintended consequences of the draft wording which could have unduly restricted investments in assets that are MA eligible.

2.13 One respondent agreed with the expectation that reinsurance assets would generally be inappropriate to include in a MA portfolio using a MAIA permission but considered that this is sufficiently covered elsewhere in the MAIA framework.

2.14 Having considered the response, the PRA has decided not to change the draft policy. The PRA considers it necessary to include an explicit expectation in respect of reinsurance assets not being suitable for inclusion in the MA portfolio using a MAIA permission as it is not sufficiently addressed elsewhere in the MAIA framework. The purpose of the MAIA framework is to support firms investing directly in assets with new features and not to accelerate the inclusion of reinsurance assets in the MA portfolio.

2.15 Three respondents commented on the PRA’s proposed expectations in paragraph 10.8 of the draft SS7/18 on situations where it would generally be inappropriate to include certain types of assets in the MA portfolio using a MAIA permission. These comments covered two related expectations that: (i) new assets with the same features as an asset that has been subject to a rejection decision by the PRA as part of a previous MA application, where one respondent considered that the expectation should be amended to state ‘assets with exactly the same features’, and (ii) assets previously included in an MA application where that application was withdrawn before a decision by the PRA, where three respondents noted that there could be reasons for the withdrawal of an MA application that are not related to eligibility concerns, such as the withdrawal being related to different assets that are part of a wider MA application or where the withdrawal is not connected to the eligibility of the specific asset. 

2.16 Having considered these responses, the PRA considers that the former expectation remains appropriate, but it has decided that the latter expectation should focus on situations where the withdrawal arose for reasons around MA eligibility.

2.17 In addition, both of the expectations discussed in paragraph 2.15 have been moved to paragraph 10.5 of SS7/18 and re-worded to link better to the firm’s assessment of MA eligibility. The PRA has added to this paragraph that firms should assume that in most cases assets with the same features as: (i) those that have been subject to a rejection decision by the PRA as part of a previous MA application; or (ii) assets that were previously included in an MA application where the application was withdrawn prior to decision due to concerns around MA eligibility, would be not MA eligible. Therefore, the PRA would expect that if a firm is considering assets with these features then the firm would apply a more in-depth eligibility assessment to that asset. This is to ensure that the firm can satisfy itself that the asset is MA eligible, notwithstanding the new features that the asset shares with the asset in the previous application that was rejected/withdrawn. 

2.18 Three respondents commented on the PRA’s proposed expectation that certain types of assets would generally be inappropriate as MAIA assets if they are more risky or difficult to remove from the MA portfolio. Respondents viewed the wording as vague and ambiguous as there are no definitions of ‘risky’ or ‘difficult’. One respondent highlighted that the consequence of removing an asset is covered by the contingency plan.

2.19 Having considered the responses, the PRA has changed the draft policy to remove the expectation. The PRA agrees that the contingency plan requirements act as a suitable control. The PRA notes that the expectation related to assets that would be risky to remove from the MA portfolio rather than risky assets per se, however, it agrees that the draft wording could have led to confusion.

2.20 The PRA notes that the changes introduced in paragraphs 2.10 to 2.19 have resulted in the moving or deletion of all but one the bullet points in the draft section 10.8 of SS7/18 with only the reinsurance expectation remaining. The PRA has therefore redrafted the main body of the paragraph to aid clarity.

2.21 In CP7/25 the PRA proposed that assets would not be eligible as MAIA assets where they had previously been included in the MA portfolio using a MAIA permission and subsequently removed or where they had been included in a MA permission application that had been refused by the PRA. Two respondents commented that there are legitimate reasons why a MAIA asset might be removed from the MA portfolio and that this should not preclude the asset or asset class subsequently being added back in. One respondent commented that if an asset is initially rejected but then later approved in a subsequent MA application then it should be eligible for the MAIA again. One respondent commented that if an asset is subject to an MA rejection decision, then the firm should be able to remediate the issue causing the ineligibility and resubmit an MA application while the asset remains in the MA portfolio using the MAIA permission.

2.22 Having considered the responses; the PRA has decided not to change the draft policy. The PRA has placed restrictions on MAIA assets being removed from and reincluded in the MA portfolio to ensure that firms undertake regularisation of MAIA assets within the expected 24-month period beginning when they are first added. The PRA considers that while there can be legitimate reasons for MAIA assets to be removed from the MA portfolio, it would be unduly complex to create rules that would both permit the removal and reinsertion and manage the risk to the PRA’s objectives, and the benefits would not outweigh the costs to either firms or the PRA. The PRA considers that removal of MAIA assets would not be a regular occurrence for firms given the buy and hold nature of the MA portfolio and therefore that this restriction should not cause a material constraint for firms. The PRA notes that removing an asset with a particular set of features does not preclude the firm adding other assets with those features subject to compliance with their MAIA permission.

2.23 The PRA notes that assets that are rejected and then approved under a later MA application, would be covered by a firm’s MA permission and therefore no longer require use of the MAIA permission to be in included in the MA portfolio. In the intervening period between initial rejection and later being included in the firm’s MA permission, the PRA does not consider it appropriate that assets remain in an MA portfolio using a MAIA permission once the asset has been subject to a rejection decision, as this would result in an inappropriate MA benefit being claimed by the firm and be contrary to advancing the PRA’s statutory objectives. After a determination of MA ineligibility, MAIA assets must remain outside the MA portfolio, including while the firm is undertaking remediation activities.

2.24 In CP7/25 the PRA proposed a modification to SS7/18 that would expect firms to regularly complete a stress test exercise to consider the implications of all MAIA assets being determined to be ineligible and include results of this stress test exercise in their ORSA. One respondent commented that the risk of all assets being considered ineligible was an extremely remote event and viewed it as difficult to envisage a scenario where this happens to all MAIA assets at the same time. One respondent commented that this expectation to include the results of the stress test in the ORSA is unnecessary given the existence of contingency plans and recommended that the expectation is removed.

2.25 Having considered the response, the PRA has decided not to change the draft policy. The PRA considers that firms using MAIA permissions may at times have concentrations such that an ineligibility decision could affect most or all MAIA assets – particularly where only a small number of assets are held in the MA portfolio using MAIA permission. In such cases, a large proportion of the MAIA exposure limit may be allocated to just a few holdings, increasing the risk to the firm if those assets are deemed to be ineligible. The PRA considers that stress testing analysis is an important risk management tool that can provide firms with insights on the worst-case outcome relating to the risk that MAIA assets are ineligible, that can help inform firms’ MAIA risk appetite. The PRA views that the inclusion of MAIA stress testing in the ORSA ensures board visibility of the risks.

2.26 In CP7/25 the PRA proposed a requirement for firms to establish, implement and maintain a MAIA policy. Two respondents commented that while some firms may find a standalone document useful other firms may prefer to cover the requirements of the MAIA policy in other existing documentation. One other respondent commented that the cost of maintaining a MAIA policy is not immaterial but manageable if firms implement the policy in a proportionate manner.

2.27 Having considered the responses, the PRA has decided not to change the draft policy. The PRA considers that a stand-alone MAIA policy is a key part of the controls for the MAIA framework. Having a single policy document also allows the PRA to specify requirements and expectations for MAIA permissions more directly and supports boards in having better oversight.

2.28 In CP7/25 the PRA proposed that the MAIA policy would be approved by the board. One respondent proposed that the board be able to delegate ownership of the MAIA policy to a board sub-committee.

2.29 Having considered the response, the PRA has decided not to change the draft policy. The PRA notes that other risk management policies are required to be approved by the board and does not consider the addition of the MAIA policy to the requirements on the board to be unduly onerous.

2.30 In CP7/25 the PRA proposed that the MAIA policy would specify the intended use of the MAIA permission, in line with the investment policy for assets in the MA portfolio. One respondent commented that this requirement would reduce the flexibility of the MAIA permission as if firms knew in advance what they would invest in they would include this in an MA application.

2.31 Having considered the response, the PRA has decided not to change the draft policy. The PRA notes that firms have flexibility to tailor the drafting of their intended use of the MAIA permission to suit their specific circumstances. While the PRA provides expectations in relation to a firm’s MAIA policy in paragraphs 10.4 to 10.16 of SS7/18, there is no prescribed template, and the contents of the MAIA policy should not unduly restrict how the firm uses its MAIA permission.

2.32 In CP7/25 the PRA proposed that firms develop a MAIA risk appetite framework to consider their tolerance for the risk that MAIA assets are determined to be ineligible for inclusion in the MA portfolio. One respondent viewed the requirement to have a risk appetite is likely to be unworkable as firms with a low appetite for ‘ineligibility risk’ would not want to make use of the MAIA.

2.33 Having considered the response, the PRA has decided not to change the draft policy. The PRA considers that it is important that firms have a stated risk appetite in respect of their MAIA permission. The PRA notes that firms using a MAIA permission accept the risk that some MAIA assets may ultimately be determined to be MA ineligible. Firms without an appetite to accept MA ineligibility risk may instead apply for a variation of their MA permission prior to adding assets with new features to their MA portfolio.

MAIA contingency plans

2.34 In CP7/25 the PRA proposed making a rule that firms using a MAIA permission must establish effective contingency plans for each MAIA asset, and a further rule that these contingency plans should be kept up-to-date and be implemented by the firm in the event that the firm is required to remove a MAIA asset. The PRA also proposed additional supervisory expectations in SS7/18 to support firms in complying with the proposed new rules.

2.35 Seven respondents commented on the PRA’s proposed expectations, of which five responded that they did not agree with, or sought clarification on, the proposed expectation in paragraph 10.10 of SS7/18 that ‘the PRA would not generally expect firms’ MAIA contingency plans to rely on a short- or medium-term sale of any MAIA asset in response to a determination by the PRA that an asset is ineligible for inclusion in the MA portfolio’. Five respondents considered that short-term asset sales could be possible for relatively more liquid assets with an active secondary market, and two of these went further and considered that assumptions could also be made for less liquid assets to be sold. One respondent considered that not assuming the rapid sale of assets was a sensible approach, and two respondents considered the likelihood of the PRA finding an asset to be ineligible to be very low.

2.36 After considering the responses, the PRA has decided to make changes to paragraph 10.10 in SS7/18 to provide clarity that the PRA’s expectation relates to immediate sales of any MAIA assets in response to a determination by the PRA that an asset is ineligible for inclusion in the MA portfolio. The PRA considers this expectation to be appropriate given the challenges in making assumptions about the possibility and terms of sale in this circumstance. The PRA has also introduced an expectation for a firms’ contingency plan to cover how the firm expects to continue to invest in that asset if it needs to be removed from the MA portfolio. Additionally, the PRA has made changes to paragraph 10.34 in the SS7/18 to clarify that firms are expected to include in their MAIA use reports whether contingency plans were implemented as planned. The PRA has made these changes to reflect that reliance on the immediate sale of such assets could lead to inappropriate additional risks, and that having robust contingency plans advances the PRA’s objective to promote the safety and soundness of firms. The PRA has also updated the text of application confirmation 2.4 in the draft MAIA supplementary information form, to ensure consistency with the updated expectations relating to contingency plans.

2.37 Two respondents asked if the PRA would be providing further clarity on what contingency plans should contain.

2.38 After considering the responses, the PRA has decided not to change the draft policy. The PRA considers that firms are best placed to design contingency plans that meet their own needs and fit within the firm’s wider risk management framework.

2.39 One respondent expected the PRA to be receptive to firms adopting pragmatic internal policies concerning the process and frequency of reviewing the contingency plans

2.40 After considering the response, the PRA has decided not to change the draft policy. The PRA confirms that firms should develop their own processes for reviewing contingency plans, including determining the appropriate frequency.

2.41 One respondent asked the PRA to permit firms to choose to remove liabilities from the MA portfolio alongside any MAIA assets which need to be removed as part of a contingency plan.

2.42 After considering the response, the PRA has decided not to change the draft policy. As noted in paragraph 9.2 of SS7/18, the PRA expects firms to consider the implication of the removal of MA liabilities from the MA portfolio on its MA permission, including whether a change is required to the permission.

2.43 One respondent expressed concern that the current wording of paragraphs 10.11 to 10.13 of SS7/18 could be interpreted as unduly punitive. Specifically, they noted that it may imply firms should be able to withstand a scenario in which all MAIA assets are deemed ineligible, while still remaining within their liquidity and capital risk appetites. The respondent suggested that this interpretation could negate the practical benefits of MAIA inclusion, as firms might be required to hold offsetting capital and liquidity buffers, making MAIA permissions ineffective compared to warehousing. They requested that the PRA clarify its expectations and acknowledge that such a scenario is extremely remote.

2.44 After considering the response, the PRA has decided not to amend the draft policy. The PRA expects firms to reflect the uncertainty of MAIA asset eligibility in their contingency plan, including reflecting the capital and liquidity impacts, as stated in paragraph 10.11 of SS7/18. The PRA considers this to be good risk management practice and not to negate the benefits of the MAIA framework.

2.45 One respondent noted that restructuring MAIA assets where the MA application has been rejected by the PRA could be a potential action under a MAIA contingency plans, with the newly restructured asset then included in the MA portfolio using the MAIA permission if it meets the relevant requirements.

2.46 After considering the response, the PRA has decided not to change the draft policy. The PRA notes that, ahead of the introduction of a newly restructured asset to the MA portfolio, such assets would first need to be removed from the MA portfolio, the contingency plan implemented, and the asset recorded in the MAIA use report.

Reporting of use of MAIA permissions

2.47 In CP 7/25 the PRA proposed making a rule to introduce an annual MAIA use report, and to amend the existing MALIR reporting. The PRA proposed setting expectations in SS7/18 to support firms with completing the MAIA use report. Under the proposal, firms would be able to determine the format of this report. Additionally, the PRA proposed making a rule that the MAIA use report must be submitted to the PRA within 14 weeks after the firm's financial year end.

2.48 The proposed policy relating to the MAIA use report would support firms’ internal operations and governance by including an assessment of the effectiveness of eligibility assessments of MAIA assets and identifying potential areas of risk management weakness. The PRA also proposed to add two additional fields to the MALIR reporting template.

2.49 Three respondents asked the PRA to reconsider the timing of the submission of the MAIA use report, citing the additional workload around year-end reporting.

2.50 Having considered the responses, the PRA has decided to change the reporting deadline for the MAIA use report to 18 weeks. This allows a four week gap after the MA attestation and year end reporting deadlines. The PRA considers timely submission of the MAIA use report as an important part of the supervisory process and has sought to balance this with the reporting burden on firms in respect of other submissions including the annual Quarterly Reporting Templates (QRTs), Solvency and Financial Condition Report, and MA attestation.

2.51 Respondents raised a number of other issues relating to the proposed MAIA reporting, in particular whether (number of respondents who raised each issue in brackets):

• (1); requiring firms to provide both the MAIA use report and MALIR report was duplicative and risked the PRA receiving inconsistent information between the sources and would eventually lead to reporting scope creep.  
• (1); it was appropriate to assess investments against green and productive categories, because this should not be its only intended use; nor should the success of the MAIA framework be judged on the proportion of assets which meet the ‘productive finance’ definition.  
• (2); the PRA will provide a prescribed format or XBRL taxonomy for the annual MAIA use report or specify items that must be included.  
• (1); the MALIR reporting changes should apply from YE25 for firms with MAIA permissions.
• (1); the PRA wished to capture amounts invested, which would be required should the PRA wish to monitor the firm’s compliance with the exposure limit set out in its MAIA permission.   
• (2); including ‘date first added to MAIA’ in MALIR would incur extra costs, new data feeds and report reconciliations.  

2.52 The PRA has considered these responses and decided not to change the proposed policy for the following reasons:

• The PRA considers that both the MAIA use report and the MALIR changes will provide helpful insight and are proportionate to the supervisory needs of firms with MAIA permissions. The PRA expects to use the use report to understand how MAIA permissions are being utilised, understand issues with firms’ compliance with their MAIA policies, understand whether the MAIA framework supports insurers investing productively, and assess the pipeline of prospective applications to regularise MAIA assets. The PRA expects to use the additional fields relating to MAIA in the MALIR data to enhance the existing analysis that the PRA performs on MALIR data. The PRA considers that these outcomes cannot be achieved by only one of these reporting changes in isolation.  
• The PRA is not mandating a format for the MAIA use reports as it considers that firms are best placed to define what best meets their needs. The PRA notes that the expectations for the content of the MAIA use report are in SS7/18 paragraph 10.34. The PRA is also not mandating firms use XBRL taxonomy.
• The PRA notes that the MALIR changes impact all firms with MA permission and not only firms that have MAIA permissions. Given the scope of these changes, the PRA’s proposed policy recognised that firms may require additional time to implement them effectively. As such, the PRA has not made any changes to the proposed policy regarding the year-end 2026 implementation timeline for the MALIR reporting changes.
• The PRA has sought to minimise the additional reporting requirements within the MAIA framework and therefore has not added an amount invested column in the MALIR. The PRA considers it proportionate to rely on firms’ internal governance to ensure that their MAIA exposures align with their MAIA permissions. 
• The PRA notes that some firms will need to update data feeds and reporting and that this will come at a cost. However as set out in CP7/25, the PRA considered these costs to be proportionate, and notes that firms will require the ‘date first added to MAIA’ data to ensure that regularisation of new assets meets the requirements in Matching Adjustment 16.2. 

2.53 The PRA notes that one respondent was supportive of the proposed reporting changes, acknowledging that the MAIA use report may have some value from a prudential perspective.

2.54 One respondent asked the PRA to clarify how the two new MALIR fields should be completed for assets for which a MA application has been submitted but on which the PRA has not reached a decision.

2.55 The PRA confirms that MAIA assets for which a MA application has been submitted but on which the PRA has not reached a decision, should be reported as MAIA assets in MALIR.

MAIA exposure Limits

2.56 In CP7/25 the PRA proposed that, in general, an appropriate MAIA exposure limit would be the lower of 5% of the best estimate liabilities, net of reinsurance, of the MA portfolio and an amount proposed by the firm which is no greater than £2 billion. In relation to a group with multiple MA permissions, this MAIA exposure limit would be applied at group level by setting lower limits to the individual solo entities, with the intention that the accumulation of these individual limits does not exceed this MAIA exposure limit. The limit applicable to any MAIA permission would remain fixed in monetary terms until the next variation of that MAIA permission. Total MAIA assets at any point in time would be assessed against the limit based on the sterling amount invested (rather than the fluctuating market value), thus removing the risk of passive breaches of the limit.

2.57 Three respondents commented that the proposed expectation of a £2 billion limit is not aligned with the risk profile of individual firms or assets. Two respondents expressed a preference for a limit per firm based for a percentage of MA benefit (e.g. 5%) - as they consider this to be more risk sensitive. One respondent further noted that such an approach would better align the limit with investments in highly predictable (HP) assets. Two respondents suggested scaling limits in respect to firm size, as well as risk profile.

2.58 Two respondents commented that larger firms are more likely to hit the £2 billion limit, therefore limiting their ability to invest and make use of the benefits from a MAIA permission. One respondent noted that the PRA considered higher limits may be possible but with additional controls on the use of the MAIA. They considered that it was preferable not to have additional controls.

2.59 Having considered the responses the PRA has decided not to change the draft policy. The standard approach to setting MAIA exposure limits is designed to balance supporting firms to invest in a broader range of assets more swiftly, and with sufficient capacity, against the prudential risks posed by including assets that are outside of a firm’s existing MA permission in the MA portfolio using a MAIA permission.

2.60 The PRA considers that the proposed £2 billion limit is intended to ensure that a firm or group’s overall use of MAIA permission(s) would be within a level that does not create material prudential risks in absolute terms. The £2 billion limit also acts to advance the PRA’s secondary competition objective where the PRA considers that the inclusion of a standard approach to setting exposure limits in MAIA permissions would limit the scope for larger firms to receive outsized benefits from the introduction of the MAIA framework. The PRA notes that firms that are approaching their MAIA limit can submit an MA application to regularise some or all MAIA assets and, if approved, this would create headroom within the MAIA exposure limit.

2.61 The PRA notes that a percentage of MA benefit approach to the exposure limit would expose firms to a greater risk of passive breaches where credit spreads on MAIA assets move differently to credit spreads on the rest of the MA portfolio. In contrast to the treatment of highly predictable assets – which are subject to a limit of 10% of the MA benefit – the MAIA exposure limit is fixed in monetary terms until the next variation of the MAIA permission and is assessed based on the sterling amount invested. The PRA considers this to be appropriate given that MAIA assets are only held using a MAIA permission for up to 24 months before a regularisation application must be submitted. Given this, the PRA considers that the simple approach based on the amount invested in MAIA assets is preferable.

2.62 The standard approach to setting exposure limits, including the £2 billion limit, will be reviewed periodically (in line with the PRA’s wider approach to limits within its policy framework) and reassessed in the light of experience.

2.63 Two respondents expressed concerns that a one-size-fits-all approach (ie application of the standard approach to setting exposure limits to all) would be too rigid. They commented that they would support bespoke exposure limits tailored to individual firm size and investment strategy. One respondent commented that smaller firms should be allowed higher percentage thresholds, if justified. They used an example of c£200 million as a typical investment size for some new asset types and that smaller firms could not access these with the proposed 5% of net BEL standard limit.

2.64 Having considered the responses, the PRA has decided not to change the draft policy. The PRA considers that applications for exposure limits above the standard limits would only be expected to be approved in exceptional circumstances. The PRA does not consider that small firms using higher than standard limits would likely be appropriate even where this might be supported by large new business sales or capital resources in the firm. The PRA notes that firms which are approaching their MAIA exposure limit may choose to regularise some or all of their MAIA assets, and once approved this would free up capacity for further MAIA assets. The PRA notes that CP7/25 contained the example of two large firms merging as an exceptional circumstance which might justify a temporary limit higher than the standard limits. In addition, 2A.9 of SoP 8/24 also permits firms to update their exposure limit through a variation application 'to reflect significant changes in the size of a firm's MA portfolio’.

2.65 One firm proposed having a limit of 2% of MA benefit from any new feature. In their view this would act to reduce the risk from a single asset or asset feature being determined to be MA ineligible.

2.66 Having considered the response, the PRA has decided not to change the policy. The PRA notes that this proposal would introduce increased complexity in the MAIA framework and be burdensome for smaller firms. While the PRA notes that the proposal may reduce the risks for firms of a single asset being determined ineligible, the PRA does not consider the benefits of this to outweigh the costs of the additional restriction. Firms may, however, choose to set a self-imposed limit on the extent to which they have exposure to any new feature, and this can be specified in their MAIA policy.

2.67 The PRA received three responses on how group exposure limits would work, and how exposure limits would work in the event of merger and acquisition activity (M&A). One respondent asked how limits would be shared between entities, and how they should be monitored during M&A and restructuring. Another commented that the MAIA exposure limit may not be adequate where another MA portfolio is acquired, leading to a MAIA exposure limit breach.

2.68 The PRA expects firms to propose MAIA exposure limits for entities in the Group taking account of the expectations in paragraph 10.27 of SS7/18. While firms should consider cumulative limits of MAIA use in line with PRA expectations, the PRA considers that there may be flexibility to the cumulative use of the MAIA to address circumstances such as M&A. The PRA notes that during M&A activity there is regular PRA engagement with firms and the approach to a firm’s MAIA permissions may be discussed at that time and take account of the specific circumstances of the firms involved.

2.69 One respondent sought clarity on interaction between MAIA exposure limits and other limits e.g. highly predictable cashflows.

2.70 The PRA clarifies that MAIA assets that have highly predictable cashflows count towards both the MAIA exposure limit and the assets with highly predictable cashflows limits.

2.71 To ensure clarity on the PRA’s expectations relating to the assessment of compliance with the MAIA exposure limit over-time, the PRA has made minor updates to its proposed expectations in paragraph 10.20 of SS7/18. The PRA considers that this assessment should be completed against the MAIA assets held in the MA portfolio at the time of the assessment.

2.72 Two respondents sought clarity on whether the committed amount or the drawn amount would be used in making this assessment for exposure limits. Another respondent also queried whether the limit would be measured against the total nominal MAIA investment amount or the prevailing market value.

2.73 The PRA has added a new expectation 10.29 to SS7/18 whereby the PRA expects firms to include both nominal amounts invested, and nominal amounts committed when assessing compliance with the MAIA exposure limit. Where amounts are not in the same currency as the MAIA exposure limit, the PRA expects firms, for simplicity, to use the currency exchange rate at the time of initial investment to convert the invested and any committed amounts.

MAIA time limit

2.74 In CP7/25 the PRA proposed a 24-month time limit to ‘regularise’ MAIA assets through the submission of an MA application. During this period, firms would be required to submit a formal MA application to regularise MAIA assets in their MA portfolios. Firms would be allowed to continue claiming MA benefit on MAIA assets while the PRA assesses the MA application.

2.75 Four respondents commented that the 24-month time limit to submit an MA application is shorter than desirable.

2.76 Three respondents raised concerns about the 24-month timeframe being linked to the submission of an MA application. These respondents considered that the timeline should instead apply to the submission of the Application Readiness Assessment Process (ARAP) form. They noted that this would help ensure that any breach of the timeline would be due to internal delays related to the firm’s own processes, rather than delays in resolving issues arising from the ARAP with the PRA.

2.77 Three respondents proposed extending the regularisation period, with two respondents specifically recommending a 36-month timeframe. One respondent commented that a shorter timeframe could lead to a higher volume of MA applications being submitted, potentially increasing the burden on the PRA. Two respondents asked whether the PRA would consider measures to avoid a ‘cliff edge’ scenario in cases where MA permission is not granted. One suggestion was to introduce a longer regularisation period but reduce the size of the MA benefit recognised for a given MAIA asset or asset class after two years.

2.78 One respondent asked for clarification on what would happen in the event where structuring timelines or third‑party consents cause delays to making a regularisation application. They asked if there is any flexibility around the 24-month regularisation timeframe, and if so, what factors might justify an extension.

2.79 After considering the responses, the PRA has decided not to change the draft policy. The PRA notes that the ARAP is not a formal requirement under the PRA rules and therefore does not provide an appropriate measure for compliance against a regulatory time limit. The PRA further notes that firms may engage with the PRA on the ARAP at any point during the 24-month window for regularisation, (ie submission of an application to include MAIA assets in an MA permission) which allows sufficient time to resolve any ARAP-related feedback prior to submission of an MA application.

2.80 The PRA considers 24 months to be a sufficient timeframe for the submission of an MA variation application. The PRA considers that extending this period to 36 months would increase the risk of assets which might ultimately be determined to be ineligible for MA inclusion generating an MA benefit for an overly prolonged period. The PRA further considers that if a 36-month timeframe was adopted, additional controls or greater restrictions would be needed elsewhere in the framework which would reduce the benefits of the MAIA framework overall. The PRA also considers that introducing measures to avoid a ‘cliff edge’ – for example, by gradually reducing the MA benefit for assets not regularised within 24 months – would add additional cost and complexity to the MAIA framework, which the PRA does not consider would advance its objectives.

2.81 One respondent asked the PRA to confirm whether firms can make multiple ARAP applications covering different asset types held within the MAIA ahead of making a single formal MA application.

2.82 The PRA considers that there can be some flexibility around ARAP submissions, including having more than one ARAP relating to an MA application. Where a firm is considering making more than one ARAP submission, the PRA encourages early engagement with the MA permissions team at the PRA (MA Submissions mailbox) to discuss a way forward, including timings. This approach would also apply to ARAPs relating to applications to regularise MAIA assets.

2.83 One respondent asked the PRA to clarify how firms should treat a MAIA asset that includes a temporary new feature – specifically, a feature that means the asset is outside the firm’s existing MA permission, but which expires or changes such that the asset is within the firms existing MA permission within the 24-month regularisation timeframe.

2.84 The PRA confirms that if a new feature of a MAIA asset is temporary and expires within the 24-month regularisation period, and the asset then meets the conditions of the firm’s MA permission, the firm may retain the asset in its MA portfolio. This is contingent on the firm having assessed the new feature to be MA eligible. This action does not constitute a removal of a MAIA asset from the MA portfolio, since the asset will remain in the MA portfolio. However, the PRA would not expect firms to use this to avoid the permission process. Therefore, if the firm expects to invest in similar assets with such features in the future - even if those features mature before the regularisation deadline - the PRA expects the firm to consider including them in its MA application to ensure the permission remains appropriate. This expectation has been included in SS7/18 at paragraph 10.16.

2.85 One respondent requested further clarity on the interplay between the 24-month regularisation period and the PRA’s expectation that firms with MAIA permission should vary that permission at the same time as applying to vary the scope of the MA permission.

2.86 The PRA stated in paragraph 3.3 of CP7/25 that a firm using a MAIA permission would need to submit to the PRA an application to vary the scope of its MA permission to ‘regularise’ MAIA assets within 24 months of their inclusion in the MA portfolio. The PRA considers that submitting an application to vary the scope of the MA permission alongside an application to vary the MAIA permission is efficient as it ensures that a firm’s MAIA exposure limit remains appropriate.

Breaches of MAIA permissions

2.87 In CP7/25 the PRA proposed that a breach would occur when a firm includes assets in its MA portfolio using the MAIA permission that are later found to be ineligible for MA, or if the firm fails to regularise the asset by submitting an MA application within 24 months.

2.88 If a firm breaches its MAIA permission in this way, then they would have a two-month period to remediate the breach, as with other breaches of MA conditions. During this time, the PRA expects to engage with the firm through supervisory dialogue to monitor progress and assess the firm’s remediation efforts.

2.89 If the firm is unable to restore compliance with its MAIA permission within that two-month period, it would be required to apply a 10% reduction of the MA benefit across the MA portfolio. This reduction increases by 10 percentage points for each additional month of non-compliance. However, if compliance is restored within the two-month window – such as by removing the ineligible assets – the reduction will not apply.

2.90 In addition to the above, the PRA may consider whether the breach indicates broader governance or risk management failures. If such concerns are identified, this could lead to more serious consequences, including the potential revocation of the firm’s MAIA permission.

2.91 Two respondents were supportive of the PRA’s proposed approach to breaches. One of these respondents also expressed support for the PRA’s proposal to address any breaches arising where a firm includes a MAIA asset in the MA portfolio that is subsequently determined not to be MA eligible, through supervisory engagement in the first instance.

2.92 One respondent felt the approach to breaches (ie an MA benefit penalty applying to the entire MA portfolio) arising from a single ineligible asset appears disproportionate. The respondent suggested a more appropriate response would be to limit the extent of the MAIA permission.

2.93 After reviewing the responses, the PRA has decided not to change the draft policy. The PRA notes that treatment of breaches of MAIA permissions is consistent with the existing rules related to MA breaches, including the two-month remediation period.

2.94 One respondent felt that the final sentence of paragraph 3.3 in CP7/25 - which states that ‘where such MA applications are not approved firms would be required to remove the relevant assets from the MA portfolio’ - does not fully reflect the nuanced treatment of certain assets. The respondent gave an example of a callable bond highlighting that even if a firm is not allowed to treat the entire bond cashflows as being MA eligible, a firm should be able to keep the fixed cashflows from that bond in the MA portfolio since those cash flows are already considered to be MA eligible and inside the scope of the firms existing MA permission. In this instance the relevant asset would not need to be completely removed from the MA portfolio.

2.95 The PRA confirms that where a firm includes an asset with highly predictable cashflows in its MA portfolio using its MAIA permission and the regularisation application for the asset is subsequently rejected, the asset may still be retained in the MA portfolio if it can be included with treatment that meets the conditions of the firm’s existing MA permission - for example, by treating only the fixed cash flows as MA eligible. This is because such treatment would result in the asset no longer having new features.

2.96 One respondent agreed with the proposal to measure the MAIA limit using the amount invested in sterling, rather than the market value, saying this would help avoid passive breaches. They also felt that such breaches would be rare because of how the limits are designed. However, they suggested that if an unintentional breach does happen – such as due to exchange rate changes – firms should be allowed to apply for MA permission for the affected assets, instead of having to remove them from the MA portfolio.

2.97 After reviewing the response the PRA has decided to change the draft policy material in SS7/18 to reduce the risk of passive breaches due to currency fluctuations. As set out in paragraph 2.73, a new expectation has been introduced in paragraph 10.29 of SS7/18. This clarifies that when a firm assesses their position against the MAIA exposure limit, they should count both the amounts already invested and any amount committed to invest. Where these amounts are denominated in a different currency, firms should use the exchange rate at the time of initial investment to convert into sterling. This approach is intended to reduce the risk of passive breaches, as it is based on a fixed exchange rate. In the event of unintended breaches of the MAIA exposure limit the PRA expects firms to remove assets from the MA portfolio that are using the MAIA permission, such that the firm returns to compliance with the MAIA exposure limit.

2.98 One respondent asked the PRA to confirm whether firms can make disposals of part of their holdings of MAIA assets while remaining compliant with the MAIA permission. The PRA confirms this.

Consequential impacts

2.99 In CP7/25, the PRA proposed updates to SS8/18 to make expectations relating to the appropriate consideration of MAIA permissions for firms that calculate the MA in the solvency capital requirement (SCR) using an internal model, where use of that permission may impact the calculation of the MA benefit. Five respondents sought clarity on these expectations and expressed concern that the proposed updates to SS8/18 did not provide a clear understanding of PRA expectations on the treatment of MAIA assets. Two of these respondents also expressed concern that this would require firms to completely remove the MA benefit of MAIA assets under stress.

2.100 Having considered these responses, the PRA has updated the draft policy materials. The PRA expects that updates to internal models will not generally be required when firms are granted a MAIA permission. Although use of a MAIA permission will introduce new risks to the management of a firm’s MA portfolio, in general the residual risks should not be material after consideration of the controls in the wider MAIA framework. Paragraph 2.6B of SS8/18 has been updated to clarify the PRA’s expectations in this regard.

2.101 Two respondents stated that with respect to internal model firms, it would be useful for the PRA to confirm whether an MA benefit in stress can be taken for MAIA assets, and also whether the risk of losing the MA benefit as a result of the asset being determined to be MA ineligible is addressed via the MAIA contingency plan proposal.

2.102 After considering the response, the PRA has decided not to change the draft policy. The PRA confirms the respondent’s understanding is correct (ie where appropriate MA benefit can be claimed in stress for MAIA assets, and that the risk of MAIA assets being found not to be eligible is considered under MAIA contingency plans) and refers to its expectations relating to consideration of MAIA permissions in internal models that calculate the MA in the SCR, as set out in SS8/18.

2.103 In CP7/25 the PRA proposed making expectations that firms should not assume the recapture of Funded Reinsurance collateral assets with new features into a MA portfolio using their MAIA permission. This expectation was proposed to apply to Funded Reinsurance limit setting, assessment of collateral management arrangements, and SCR modelling. Six respondents commented on these expectations. One respondent expressed support for the changes noting that the use of the MAIA in a recapture scenario is highly uncertain.

2.104 Three respondents commented that the proposed expectations would have unintended adverse consequences for intra group reinsurance arrangements. They stated that under the proposed expectations MAIA assets held in an MA portfolio by an intra group reinsurer cannot be counted as eligible assets for the cedents when setting and assessing collateral. The respondents proposed an exclusion of intra group reinsurance arrangements from consideration of these expectations, where the reinsurance is to another MA portfolio from the proposed expectations in SS5/24.

2.105 Having considered these responses, the PRA agrees that there could be unintended consequences because of the changes proposed to SS5/24 in respect of intra group reinsurance where the reinsurance is to another MA portfolio. The PRA has amended the proposed wording in 2.7A, 2.18 and 3.13A of SS5/24 so that firms can assume recapture into the MA portfolio using its MAIA permission where the asset: (1) is collateral in an intra group reinsurance arrangement; and (2) is the same as an asset included in the firm’s MA portfolio under a MAIA permission.^{footnote [8]}

2.106 One respondent commented that the proposed expectations in SS5/24 are unnecessarily restrictive where firms have an existing MAIA permission and sufficient headroom to absorb the recapture of assets with new features that satisfy the MA eligibility conditions. The respondent commented that an allowance for recapture into the MA portfolio using a MAIA permission should be made in the proposed SS5/24 expectations for firms that regularly perform monitoring and assessment of the reinsurance collateral’s MA eligibility.

2.107 Having considered the response the PRA has decided not to change the draft policy. The PRA notes that firms are expected not to assume in their contingency plans that recapture of Funded Reinsurance collateral assets will be possible due to the uncertainty in the level of unused MAIA exposure limit at the time when such action may be needed. The proposed MAIA framework would not restrict the use of a MAIA permission to include assets in an MA portfolio in a Funded Reinsurance arrangement recapture event, provided the firm has sufficient unused capacity, and the assets satisfy the firm’s MA eligibility assessment. However, the PRA considers that, in order to rely on such an outcome as an assumption, it would be necessary for firms to restrict use of the MAIA permission to ensure adequate capacity is available against the MAIA exposure limit in a recapture event. The PRA does not consider this as a good policy outcome as the firm’s MAIA exposure limit could then not be fully utilised for new investments. The PRA considered more complex expectations in this area but views that the costs of this would outweigh the benefits for both the PRA and firms.

2.108 One respondent stated that the additional expectations in SS5/24 in respect of the MAIA and Funded Reinsurance are not aligned to the PRA’s objectives and ‘have regards’ as it would reduce the attractiveness of Funded Reinsurance which the respondent views as a valuable risk management tool.

2.109 Having considered the response the PRA has decided not to change the draft policy. The PRA considers the additional expectations set out in SS5/24 align to its objectives and ‘have regards’, in particular, the need to ensure safety and soundness of firms and the protection of policyholders.

2.110 One respondent highlighted that the MAIA framework may help to reduce the need for Funded Reinsurance to support large pension risk transfer deals. The PRA notes this comment.

2.111 One respondent asked the PRA to confirm whether Funded Reinsurance is eligible for inclusion in an MA portfolio using a MAIA permission.

2.112 The PRA has set out expectations in section 10.8 of the updated SS7/18 that reinsurance assets (including Funded Reinsurance) are generally inappropriate for inclusion in the MA portfolio using a MAIA permission.

2.113 One respondent asked for additional clarity on the application of the PRA’s expectations to reinsurance arrangements where the ceding insurer retains control of the collateral asset.

2.114 The PRA notes that the expectations in respect of the MAIA and Funded Reinsurance apply in these situations.

Other responses

2.115 Two respondents proposed that the PRA extend the MAIA initiative to a similar initiative in relation to MA liabilities.

2.116 The PRA notes that this was not a proposal in CP7/25 and the PRA has not provided feedback on this in this PS. The PRA shall consider the points raised in further policy development where such a policy initiative advances the PRA’s statutory objectives.

2.117 One respondent asked if the PRA had plans to add to this initiative and develop an ‘MA Sandbox’.

2.118 The PRA has held discussions on an ‘MA Sandbox’ proposal through the MA Sandbox Subject Expert Group, alongside the work that led to the PRA’s MAIA proposal. The PRA notes that this was not a proposal in CP7/25 and the PRA has not provided feedback on this in this PS.

2.119 Two respondents noted the PRA’s use of a subject expert group to inform the development of the MAIA concept. The respondents commented that the subject expert group format is one that should be widely used by the PRA on future of policy development work.

2.120 The PRA notes this feedback and considers that subject expert groups are an effective method of engaging with stakeholders early in the policy cycle as highlighted in the PRA’s approach to policy.

2.121 One respondent expressed concern regarding the length of the consultation process for CP7/25 and suggested that longer periods should be provided in future.

2.122 The PRA notes this feedback. Considerations relevant to determining an appropriate length of consultation period are described in PRA’s approach to policy. In the case of CP7/25, the PRA considered a range of relevant factors, including the input from the subject expert group and the Insurance Practitioner Panel, to determine an appropriate length of consultation period.

Cost benefit analysis

2.123 In the CP, the PRA set out its cost benefit analysis for the MAIA proposal. One respondent noted that while they disagreed with the estimates used in the cost benefit analysis they agreed with the conclusion. However, the respondent provided no further details on which estimates they disagree with.

2.124 Another respondent noted that the PRA’s view on warehousing assets is aligned to industry views and they stated their preference to be able to place purchased assets directly into the MA portfolio. In addition, they noted that there would be costs associated with MAIA assets, such as for internal governance and the MA attestation. The respondent also noted that the MAIA framework allows firms to group multiple assets with new features in a single application for variation of the MA permission. The respondent further noted that the potential benefits of the MAIA framework substantially outweigh these costs.

2.125 The PRA notes the respondents’ comments and considers that these support the PRA's CBA conclusion. The PRA notes that internal governance and MA attestation costs would be incurred regardless of whether assets are included in the MA portfolio using a MAIA permission.

2.126 One respondent stated that the proposed MAIA framework may act as a barrier to entry where incumbent firms have competitive advantages or new entrants do not have an established track record of using the MA.

2.127 After considering the response the PRA has decided not to change the MAIA framework. As outlined in CP7/25 (paragraphs 3.63 to 3.65), the PRA considers the MAIA framework to have a modest but positive impact on its secondary objective to facilitate effective competition. While larger firms may be better positioned to source assets with new features and manage associated risks, the standard approach to setting exposure limits is intended to mitigate outsized benefits and promote a more level playing field. The framework also supports innovation and competition by enabling firms – particularly those scaling up their annuity business – to access a broader range of eligible assets more quickly. The PRA considers that firms with narrower existing MA permissions may benefit most from the flexibility afforded by the MAIA.

2.128 Overall the PRA considers the MAIA framework to be proportionate, balancing investment flexibility with appropriate controls to promote the safety and soundness of firms and contributing to the securing of an appropriate level of protection for policyholders.