Study On Asset Liability Management For Life Insurance Companies Of China

Asset Liability Management (ALM) is an important tool to manage the risk of life insurance companies. It originated in western commercial banks. Due to the changing of the economic environment in the passed years, ALM has gone through three development stages that are asset management, debt management and asset liability management. Now, ALM plays an increasingly important role in the life insurance companies, many life insurance companies put it at the center of the companies' organizational structure, ALM has become the main way to control the business risk of life insurance companies. To strengthen supervision of insurers'solvency, insurance supervision authorities have made some specific regulations on the ALM methods and techniques used in life insurance companies in many countries. Many rating agencies also have shown increasing interest in ALM of life insurance companies. Based on ALM models, the author has made a study on ALM of life insurance companies of China.First, the paper makes an analysis of the traditional ALM models. These traditional models are gap model, cash flow matching model immunization model. They are relatively simple and easy to understand, but they have some inherent defect. With the expansion of the scale of the life insurance companies and the increasingly complex of financial environment, the limitations of these models have become increasingly prominent, so they are not fit for the current environment. Life insurance companies must establish a more suitable model to meet the needs of the current ALM. Then, according to the basic characteristics of participating policies, this paper establishes an asset liability management model for participating policies based on the multistage stochastic programming. The model uses the return rate of assets,premium income,benefit payments and liability balances to reflect the uncertainty of participating policies, and takes account for the transaction costs and the limits of laws and regulations.Finally, this paper analyzes how to apply the model in life insurance companies. In the application process, the author uses the bootstrap technique to generate scenarios for the return rate of assets, and uses stochastic simulation technology to simulate survival state of insured to generate scenarios for liability scenarios which are premium income,benefit payments and liability balances. Through the scenarios, the author...