Life Insurance Companies, Asset Liability Management And The Immune Model The Use Of Research

Since 1980^th insurance companies of China have gained excellent achievement, and they gradually found its way into the fields like security,banks and so on to form the mixed-management. With the implementation of market-directed interest rate and the innovation of financial products, it broadens the gap between profit and loss, meanwhile the interest rate risk inside the insurance company is enhanced which caused the uncertainty of asset and liability value and the possibility of insolvency and bankruptcy will be raised, so the Asset and Liability Management with the core of interest rate management is proposed. Simply speaking, ALM means that asset value is matched with liability value; in specific it is distributing the capital into some efficient investment products according to the present products' structure and the situation of financial market, so that it can avoid the mismatch of asset and liability value. In a word, ALM is the method that makes the asset and liability value is consistent in fluidity,interest rate term structure,interest rate sensitivity,term formation and so on, and meanwhile achieving the maximization of profit in the premise of solvency. Therefore it plays important role in the management of life insurance companies.This paper mainly introduces some methods of ALM which most of insurance companies employ at present, including Cash Flow Matching,Gap Analysis,Cash Flow Test,Immunization and Dynamic Financial Analysis. The method of Immunization is more applicable to the ALM of insurance companies in China so that there are a number of academic works focusing on bond market, subsequently some researchers took advantage of this method to study the ALM of insurance companies, but the majority is inclined to qualitative study and the quantitative materials is scarce. Therefore referring to the foreign shaped methods of immunization and the current situation of insurance companies ,this paper focuses on some common models of immunization that contains the basic immunization model of Redington,the immunization strategy of Fisher-Weil,the immunization of effective duration,the immunization of stochastic duration and the strategy of M² .At the same time these methods are compared with each other and their limitations are stated. The main content of this paper is the demonstration of the basic immunization model of Redington and the immunization of stochastic duration in detail with some quantitative data, which shows how to execute the immunization of interest rate.In addition, this paper comments on the design of insurance products related with the duration immunization of ALM. Moreover it proposes some mathematical models combined with the knowledge of accuracy and discusses the two-stage premium structure in the condition of equal payment.Finally this paper analyzes the pattern of ALM that Chinese insurance companies should conform to, which is the combination of liability-directed and asset-directed management. Besides it explains the process of ALM basing on the immunization theories, and then the insurance companies can optimize their products, change their strategies and improve the mode of management.