Research On Dynamic Assets And Liabilities Management Technology In Chinese Life Insurance Company

Assets and liabilities management (ALM) is a approach of managing risk. The life insurance companies are economic entities of operating unique risks, which risk measurement is affected largely by interest rates, mortality rates, exchange rates and other factors. With the economic and financial globalization and the international financial environment becoming complex, domestic life insurance companies have been facing the increasingly fierce competition; with highly financilization of the life insurance companies' products and increasingly broadening of investment channels, life insurance companies' products are linking strongly more with other financial products. Risk control is the management core of life insurance companies. Now, they need urgently a set of target system to conduct risk identification, Measurement and dynamic monitoring.The theory and application technology of Assets and Liabilities Management of have been very mature, But the dynamic Assets and Liabilities management in the international community is just beginning. So, it is a major lessons issue to develop dynamic Assets and Liabilities Management that fit for the development of China's life insurance industry. As such, this paper presents dynamic asset and liability management thinking, and introduces the necessity on dynamic asset and liability management as well the general technology of assets and liabilities management .The paper focuses on technology and application of Cash Flow Testing(CFT); It also analyses the CFT's limitations in practice. Next, method of Dynamic Finance Analysis(DFA) is been introduced.DFA is a kind of dynamic asset and liability management. It is advanced CFT and represents the trend of the ALM. Now, the application of DFA is most been used in property insurance company. It's application is just beginning in life insurance company. In China, DFA is in period of beginning. A lot of life insurance companies are using the traditional and static methods.Because of its single subject in risk management, CFT is relatively easy to operate and control, so it is more suitable for China's life insurance companies, also suitable for detection of insurance supervision departments. Therefore, CFT is currently applied to China's life insurance industry's characteristics of the assets and liabilities management. However, its biggest limitation is only for the measure of interest rate risk . This paper extends CFT's application in the practice and takes account of other important factors that will affect profit, for costs, mortality and surrender rate, and presents analysis of the application. Of course, CFT can also be extended unlimitedly, more other impact factors can be introduced into the model. What we need is an idea, a method, Such idea and method have important guiding significance for Chinese life insurance companies to establish dynamic asset and liability management information systems and application of ALM strategy.