UK life firms rethink forex hedging after PRA note

Matching adjustment applicants using forex forwards have little time to adjust

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After months of preparation for the Solvency II matching adjustment, the UK regulator has ruled out a key part of some firms’ plans in a letter published just days before official submissions began.

In the most recent of a string of communiqués on the subject, dated March 28, the Prudential Regulation Authority (PRA) shut the door on firms using foreign exchange forward contracts to hedge forex risk on matching adjustment assets. While insurers had fretted over whether more exotic assets would q