UK insurers cautioned on Solvency II credit risk assumptions
PRA warns internal model firms against "mechanistic re-application" of matching adjustment calibration in determining credit risk capital requirements
UK internal model firms may have to review how they calculate credit risk capital requirements for matching adjustment (MA) portfolios, following a letter published by the local supervisor.
In a Solvency II implementation note dated September 1, the Prudential Regulation Authority (PRA) detailed its view on assessing credit risk for matching adjustment portfolios. "The amount of credit risk capital should not be dictated by the matching adjustment calibration that applies to the calculation of
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