Uplift to the discount curve permitted under Solvency II for a ring-fenced asset portfolio matched to predictable liabilities, equal to the asset spread less the fundamental spread.
An insurer holding bonds to maturity to pay annuities does not suffer those bonds' price swings: only issuer default concerns it. Marking them to market would show own funds volatility it will never experience. The matching adjustment answers that objection by permitting liabilities to be discounted at an uplifted rate. Access is narrow and subject to approval. Assets must be ring-fenced in a dedicated portfolio and managed separately, their cash flows must be fixed and matched to liability cash flows, the liabilities must carry no significant surrender option, and no discretionary reinvestment may break the match. The size of the uplift is the portfolio's average spread less the fundamental spread, that is less the portion of spread remunerating expected default and downgrade cost: only the illiquidity premium is appropriated, never the credit risk premium. The mechanism is decisive in the British annuity market, where it carries a substantial share of the sector's own funds.
Ring-fenced annuity portfolio as of December 31, 2025, average asset spread 145 basis points, published fundamental spread 38 basis points. The matching adjustment stands at 107 basis points, added across the whole discount curve. On a 6 billion euro liability with a duration of 12, that uplift cuts the present value of obligations by roughly 750M EUR, an amount that flows straight into prudential own funds.
matching adjustment sous Solvabilité II, portefeuille cantonné, MA portfolio, majoration d'actualisation