PS 9/20 and updated SS 3/17: Illiquid and unrated assets

The Prudential Regulation Authority (PRA) published Policy Statement 9/20 (PS 9/20) to provide feedback to the responses to the Consultation Paper 23/19 (CP 23/19) on "Income producing real estate loans and internal credit assessments for illiquid, unrated assets". At the same time the PRA published the updated and final version of the Supervisory Statement 3/17 (SS 3/17), the name of which is now "Solvency II: Illiquid unrated assets".

This Milliman briefing paper summarises key amendments made to the updated SS 3/17, and provides our view on how an internal credit assessment framework used by an insurer for examining illiquid and unrated assets, such as equity release mortgages or private debts, can be improved to better align with the regulator's expectations for the Matching Adjustment calculation. If you would like to discuss this topic in detail, please contact Paul Fulcher or Sihong Zhu, or your usual Milliman consultant.