The Prudential Regulation Authority (PRA), a division of the Bank of England, has initiated a consultation aimed at expediting insurance sector investments to stimulate economic growth.
This move responds to the government’s call to reduce regulatory barriers and foster a more dynamic investment environment.
Central to the PRA’s proposal is the reform of the matching adjustment application process. Traditionally, insurers were required to obtain full regulatory approval before making specific investments.
The proposed changes would allow insurers to start investments while awaiting formal permission, thereby enhancing their agility and competitiveness.
PRA chief executive officer Sam Woods emphasised that this innovation would enable insurers to make more rapid investment decisions, supporting growth in the UK economy while maintaining policyholder protection.
The matching adjustment mechanism ensures that insurers’ assets generate sufficient cash flows to meet future policy and pension obligations. By aligning asset cash flows with liabilities, insurers can reduce capital requirements, provided certain conditions are met.
The proposed reforms aim to streamline this process, potentially unlocking billions of pounds for investment in British infrastructure projects, the authority said.
This initiative is part of a broader effort to address economic challenges and invigorate the UK’s economy. By facilitating quicker investment decisions, the PRA aims to channel more capital into productive sectors, thereby fostering economic growth and addressing infrastructure needs.
The consultation, which closes Wednesday, 4 June 2025, will allow stakeholders to provide feedback on the proposed changes.
The PRA’s approach reflects a commitment to balancing regulatory prudence with the need to stimulate economic activity, ensuring that policyholder interests remain protected while enabling insurers to contribute more effectively to the UK’s economic development.
Ewen Tweedie, actuarial director at insurance consultancy Broadstone, said: “The PRA’s consultation paves the way for greater insurer investment in the UK economy – a key plank of the government’s growth ambitions.”
He said that the Matching Adjustment Investment Accelerator (MAIA) would help insurers leverage their capital resources by enabling faster investment decisions on time-sensitive opportunities, allowing the insurer to claim Matching Adjustment (MA) benefits immediately, with PRA approval to follow within 24 months.
“The proposal includes limits on the amount of MAIA assets included in the MA portfolio, to balance prudential risks against increasing investment capacity. It demonstrates the regulatory direction of travel towards unleashing the substantial financial power of the UK’s insurance firms into the country’s economy and infrastructure,” Tweedie explained.
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