// definition
Matching adjustment
Prudential adjustment for matched cash flows
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Short definition
A UK prudential mechanism requiring permission, which increases the discount rate for eligible liabilities backed by a portfolio meeting cash-flow matching criteria. The adjustment deducts compensation for retained risks from the asset spread. It lowers the present value of liabilities without generating immediate cash.
risk atlas
Knowledge map
Intuition
Holding assets until their cash flows arrive can reduce prudential volatility under specified conditions.
Related analyses
Primary sources
- PRA: Life Insurance Stress Test 2025Annex 3: rationale, discount rates and retained risks.