The Research Of Insurance Funds Investment Based On Asset Liability Management

China’s insurance industry has experienced rapid development overthe past20years and has made significant remarkable achievements, butit is now facing competition in homogeneous products, increased capitalmarket volatility, premium rate marketization, and many other challenges.How to conduct effective asset and liability management under theoverall risk management framework is a basic requirement for China’sinsurance industry to get an effective means of balancing multiplestrategic objectives in the current and future coordinating environmentsand to realize the sustained growth of China’s insurance industry.Insurance operations and investment correspond to two aspects of theinsurance companies, which are liability and asset operations. In order toensure that insurance companies have sufficient solvency, on the onehand, their investment must be based on the characteristics of liabilities,such as the length of the insurance period, the predetermined level ofinterest rates, the future cash flows to be paid and other characteristics, toensure there is sufficient money to repay; on the other hand, insurance business is limited to a certain range according to the size andcharacteristics of assets so as to control the whole risks.In this article, I have researched the optimal investment portfolio ofChina’s insurance funds under existed regulations from both theoreticaland empirical expects. On one side, I have proposed updated optimalinvestment model for insurance funds adding risk factors based onstrategy asset allocation; on the other side, analyze performances of themajor asset classes in different stages of Chinese economic cycle and useMerrill Lynch investment clock model to verify the result. Verify modelsand draw conclusions with practical value by empirical research. Finally,according to the results and development of current insurance funds andfinancial markets, I have made some recommendations on insurance assetallocation.