PwC comments on the proposed last minute deal struck by Parliament to not drop the matching premium ahead of Wednesday's important Solvency II Economics and Monetary Affairs Committee (ECON) vote. The matching premium refers to whether insurers will be able to adjust the discount rate to reflect the risks being run on certain long-term insurance products such as annuities. If the matching premium is dropped, as previously proposed, this will have a serious impact on some insurers' ability to provide affordable long-term insurance products and also on insurers’ investment portfolios.
Paul Clarke, global Solvency II leader at PwC, said:
“The lobbying by the industry has clearly paid off. It is a positive development that Parliament has recognised how vital maintaining the matching premium is on insurers’ ability to continue to provide affordable long-term annuity products.
“It is a great relief for many insurers that the matching premium looks set to be included in the Parliament’s proposals, albeit under a different name - matching symmetrical adjuster (MSA). Without this, consumers could be left facing reductions in the range of products on offer and increases in product prices.
“The important thing now is to wait and see what detail comes out on Wednesday as there is still a note of caution about the degree of alterations that may be made. Overall, this is a positive battle for the industry to have won on Solvency II.”
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