The benefits of Solvency II unit matching

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By Paul Turnbull, Emma Hutchinson, Fred Vosvenieks, Magnus Wilson | 19 July 2018

Solvency II presents an opportunity for insurers with significant blocks of unit-linked business to revise their investment strategy in a way which could provide a significant increase in available liquidity and a reduction in market risk. This is achieved using ‘Solvency II unit matching’ - the process of more closely aligning the insurer’s holding of unit-linked investment funds with the unit-linked part of the Technical Provisions.

This research report which describes the approach and provides an overview of the theory underlying Solvency II unit matching. Based on insight from implementation experience, the paper also highlights the primary benefits of the approach and considers the potential downsides and key implementation considerations.