Sterling volatility adjustment

The sterling volatility adjustment is the addition UK insurers may make to the risk-free discount rate they use for long-term liabilities. It is published monthly by the PRA, in the same workbook as the risk-free curves, and it moves with credit spreads: when spreads widen the adjustment rises, which is precisely the point of it — it stops a liability valuation swinging on spread movements an insurer holding to maturity will never realise.

The adjustment is one input to regulatory liability valuation, rather than an asset return. This history is intended to make the monthly series easy to inspect alongside the rates and spreads shown on the Economic Dashboard. For the UK prudential framework and matching-adjustment coverage, see Solvency UK. The underlying methodology, reference portfolio and publication calendar remain those of the regulator named below.