Application Of Immunization Strategy To Anti-interest Life Insurance Products

Life insurances are often faced with the risk of interest rate in the investment and management of companies. The change of interest rate directly affects the realization of the expectation ruturn of various investments, and then consequently affects the realization of the expectation value of portfolio strategies on the scheduled moment. For escaping this risk, the immunization strategy, as an effective way to manage assets and debts, is extensively applied in the finance and insurance sectors. It can make sure that investors obtain the expectation return however the intereste rates change, even on the conditon of the most advers changes in interest rates.At present, our country is usually from the macro point to avoid the interest rate risk of life insurance products in China, that is, to control and prevent the risk based on assets-debts management using financial re-insurance, investing management, and products innovation. This paper, from the micro point of view, uses immunization strategy to design life insurance products against interest rate risk by which enable these products to have the congenital ability of avoiding the interest rate risk. So it can control the interest risk of life insurance fundamentally.Firstly this paper summarizes and narrates the researches at home and abroad about the immunization and interest rate risk of life insurance products pricing. Then introduces general measures to avoid the rate risk of life insurance products pricing from three aspects, including products innovation, investing management, and financial reinsurance. This part discusses the limitation of these measures, and notes the advantages of immunization strategy. Then introduces the theory of immunization and the application of the discrete random interest rate immunization strategy to prevent interest rate risk on life insurance products pricing. At last designs the life insurance products which can avoid the risk of interest rate by empirical methods, that is applying dynamic interst rate process obtained from the binary tree structure to immunization strategy and then designs the premium of life insurance products. And it is compared with the trational method of life insurance products pricing.The last part gives a conclusion of the whole paper and several points for further research.