Risk glossary


Matching adjustment

Under Solvency II, insurers are required to calculate the value of their liabilities using a risk-free interest rate. The matching adjustment is an upward adjustment to the risk-free rate where insurers hold certain long-term assets with cashflows that match the liabilities. It reflects the fact that long-term buy-and-hold investors are not exposed to spread movements in the same way that short-term traders of such assets are.

Click here for articles on the matching adjustment. 

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