Description: The article introduces a cashflow matching strategic asset allocation (SAA) framework for life insurers. Given the recent shift to higher interest rates after two decades of persistent low interest rates, insurers have an opportunity to enhance their asset liability management by rebalancing asset portfolios to narrow duration gaps and attain higher risk-adjusted yields. The framework aims to align investment objectives with economic, regulatory, and rating agency requirements. It prioritizes cashflow matching as the primary optimization goal and incorporates security-level asset information to assist portfolio managers in executing SAA seamlessly. The article highlights the benefits of the cashflow matching SAA framework, including greater attention to cashflow matching, unbiased results, readily executable strategies, and stable economic reserves. A case study is included to demonstrate the effectiveness of the framework in improving risk-adjusted return and cashflow matching for a representative liability block.

Description: This article is part of a 2 part series on real options analysis (ROA). Before you can understand the limitations of ROA, you must first understand the difference between risk and uncertainty. This article goes into detail explaining the vast differences between the two phenomena.

Description: The author uses a generalized asset risk model to explore C1 risk, drawing heavily from investment theory and pension fund management, applying these to an insurance general account. This article has two parts the first part, contained in this issue of Risk and Reward, describes the basic C1 model itself. The second part, which will be published in the next issue of Risks and Rewards, discusses various implications of the basic C1 model, especially related to managing the company’s investment portfolio.

Description: After a very challenging year, actuaries need to look back and consider the lessons learned. Have we returned to where we were, or have we moved on to a new norm? What does the COVID-19 pandemic market data tell us that will help us to prepare for future global crises?