Design And Research Of Interest Rate Risk Resisting Life Insurance Product Based On Immunization Strategy

Financial institutions such as insurance companies often face the interest rate risk in their investment and operation. As the most popular method of Asset-Liability Management, immunization strategy aims to protect investment portfolio from interest rate risk, especially the downside risk.Different from the traditional interest rate risk management, this paper did the ALM analysis in a microscopic view. It applies the 'duration matching' approximate immunization strategy to design the premium and benefit of life insurance product which can effectively resist the interest rate risk in advance.This paper is made up of five parts. Chapter 1 makes an general introduction of the interest rate risk and some countermeasure companies often adopt. Chapter 2 briefly introduced the definition of 'Duration', the Redington Immunization Theory, the 'duration matching' method and its application on life insurance product design. Chapter 3 discusses how to design the premium structure based on the immunization strategy. In addition to the equivalent present value, the duration of the premium asset is set to be equal to the duration of benefit liabilities. Compare to the traditional life insurance product, we proposes two-phase and multi-phase premium structures and has proved their advantage and stability when interest rate fluctuates. Chapter 4 shift the discussion to the benefit design. It also can immunize the interest rate risk effectively. The last part gives a conclusion of the whole paper and several points for further research.The innovation of this paper is firstly, it makes a systemic discussion of both the premium and benefit structures in continuous and discrete time states. Secondly, it gives their actuarial expressions as well as conditions of their existence in various models with the matrix equation, which makes the problem much simple. It also deduce some important conclusion of the optimal premium and benefit change time. Thirdly, this paper creatively proposes the multi-phase structure according to the income changes of the policy holder and the life cycle model theory.