Description: Authored by Charles L. Gilbert and Hélène Baril of Nexus Risk Management, this expert-opinion piece advises Canadian life insurers on how IFRS 17 changes asset-liability management for the Contractual Service Margin (CSM). It presents a two-lens ALM framework—(1) manage assets notionally supporting fulfilment cash flows to control interest-rate driven P&L/OCI volatility, and (2) use strategic asset allocation for assets notionally supporting capital and the CSM to optimize market-risk/return and capital efficiency. The article contrasts backing the CSM with FVPL growth assets (higher long-term returns but more earnings volatility and capital cost) versus amortized-cost/FVOCI fixed income (greater earnings stability but lower yield), and discusses reinvestment, capital implications and operational choices. Its intent is practical guidance; its value is a clear, actionable framework for weighing accounting, capital and economic trade-offs.

Description: Asset Liability Management (ALM) is a vital function in insurance operations, focusing on the strategic alignment of assets and liabilities to enhance risk-adjusted returns while ensuring compliance with regulations and fulfilling policyholder commitments. The rise of negative credit spreads poses a fundamental challenge to conventional ALM models, compelling insurance companies to reevaluate their investment strategies, hedging techniques, and risk management practices. This analysis indicates that negative credit spreads bring both considerable challenges and distinct opportunities for insurers. Although they narrow profit margins and complicate traditional spread-based investment approaches, they also offer potential for capital gains and alternative revenue sources for insurers willing to adapt their ALM strategies accordingly.