Dynamic Asset Liability Management Model For Insurance Assets

Insurance company has the responsibility of covering policy holders' loss by insurance capital. Insurance capital, which has special usage and copes with the damage results caused by nature disasters, generally involves insurance fund, capital and loans. As an economy principle, insurance company like other financial institutions faces variety of risks. The instability of risks and more and more furious competition makes insurance company strengthen the asset liability management and matching cash flows.The structure of the thesis: First, it concisely introduced the particularity of insurance company and insurance capital's usage. In the second chapter, it intends to introduce the development procedure of the asset liability management in financial institution. We divided the procedure into two parts. One includes some classical model and the other focus on the new developed asset liability management model. Following, it describes in detail of the dynamic stochastic programming model used in asset liability management, consisting of the basic concepts, optimizing model and the steps. Then we take a simple model as an example to explain this stochastic model in the chapter four. Finally, it gives the main contribution and limitation of the paper.The main contribution of the paper lies in that: (1) Based on literature review, it summarizes the development backgrounds and procedures of the asset and liability management in financial institution. (2)It establishes a theoretical framework of dynamic stochastic programming model used in asset liability management, which includes how to produce the scenario with econometric model, the mathematic DALM model and the special objective function. (3) We take a simple model as an example to explain this stochastic programming model.The limitation of the paper and suggestions: (1) There is a lack of realistically understanding of our country's insurance industry and supervision requests. When established the model, we usually take some ideal situation and think less of the real situation. (2) The dynamic stochastic programming model's difficulty and emphasis lies on implement. In the chapter 4, we take a simplified model as an example due to the time and energy limitation. It will make all more desirable if we carry out the model step by step. (3) The paper focus on the dynamic stochastic programming, however, it did not explain the advantage of this model and compared to other models, what extends the DALM model outgoes the others.I expect these limitations can be mended in the following research.