firms : the reinsurer benefits from cross - risk diversification ; there may be tax advantages ; and so on. but there are also potential regulatory drivers : the balance between the treatment of credit risk underpinned by the ma and the treatment of longevity risk underpinned by the risk margin can incentivise this choice. whilst it is clear that reform is needed, there remains a choice of method to implement this reform. internationally, market - consistent regimes have used a variety of different approaches to risk margin calculation. the data we gather in the qis will help form proposals on the best way to implement reform which meets the objectives of the review. matching adjustment turning to the matching adjustment. the matching adjustment, or ma, has a clear link to the investment incentives for annuity writers. as such, an ma that works will be a key plank of allowing annuity writers to support the recovery and growth, both by innovating, and by investing in long - term productive assets and in assets consistent with the government ’ s objectives on climate change. the ma lets a firm recognise an immediate benefit today, from future returns above the risk - free rate that have not yet been earned. so getting the ma right is critical for ensuring the right level of policyholder protection in the uk, and getting it wrong could have very severe consequences. this means that any reforms to the ma will be a key determinant of success against all three of the government ’ s objectives for the solvency ii review. my colleague charlotte gerken discussed in april how we use the ma as part of our supervisory approach, and i won ’ t rehearse the points that she made today4. as a regulator, we have long believed in the core concept behind the ma. we firmly supported its inclusion in solvency ii, and we brought in a similar mechanism in our previous individual capital adequacy standards ( ‘ icas ’ ) regime. there has been a lot of feedback about broadening of the asset eligibility criteria for the ma, and about simplification of the application process. we have heard this feedback, and are confident that the review can achieve improvements in these areas. if we get these changes right, the path can be smoothed for insurers to invest for the long term in a way which supports innovation and growth and is sustainable. of course as i said earlier, unless there is adequate policyholder protection, any such changes will not meet these objectives. so through the qi

important the uk insurance market is, and how large the sector is relative to our economy3. the london market is competitive, in 2 / 6 bis central bankers'speeches part, precisely because policyholders are confident their claims will be met. and as discussed, the life sector is responsible for paying retirement income to millions. this retirement income underpins a significant amount of spending, and much of it is provided in a way – via annuities – in which the investment and longevity risks are borne by insurers – so the security of that source of income and spending depends on the soundness of the life insurance sector. there is a growing degree of consensus around the world, exemplified by the work of the international association of insurance supervisors ( iais ), over the financial standards to which insurance should be held. but the consensus does not imply uniformity, and when making comparisons between regimes, it ’ s also important to control for the importance of the sector to the economy, the reliance consumers place on it, and the ability of firms to fail in an orderly way which causes the least damage to policyholders. provided that the foundation of adequate policyholder protection remains in place, we believe there will be scope for making changes which meet the other objectives of the review. to make tailored change to the regime which better meet the needs of the uk market and the broader economy. quantitative impact study in modern construction, modellers can render the proposed new building in 3d according to the architect ’ s plans. even before the building work has begun, it is possible to have a sense of what the design looks like in practice and judge whether it will deliver on the original vision. in policymaking we also aspire to get a projection of the end result, but unfortunately we currently lack the required rendering software, so instead we have to rely on impact study exercises. these exercises are vital in giving us the detailed, accurate measurements we need. for this reason we, in agreement with hm treasury, are planning a quantitative impact study ( qis ) for the solvency ii review. we intend to gather the data that will allow us to project the impact of a number of different possible designs ; this will give confidence before the proposals are finalised that the ultimate designs will really work. i ’ m going to cover today some of the areas we plan to gather data on through the qis, as well as the process we are planning on following. at the outset, it ’ s important to be clear that nothing