Study On TheLong-term Asset Structure Optimization For Life Insurance Based On Asset Liability Management

It is a crucial stage for the reform of financial system in China over the next few years. The interest rate liberalization could cause intense market fluctuation while breaking the old market structure. At the same time, premium rate liberalization for insurance products shall increase the costs from the perspective of liabilities and put considerable pressure on the profitability of assets. This paper tries to think as both the asset management institutions for life insurance accounts and the regulatory authority, and focuses on the potential improvement of asset structure and asset allocation decision-making process for life insurance accounts.At the beginning, this paper combines the theoretical characteristics of asset portfolio for life insurance accounts with the relevant situations in foreign countries such as the United States and the United Kingdom. Later in this part, the paper reviews the current situation of life insurance portfolio under comparison.In the next part, the author brings about3potential problems in the life insurance asset management industry:emphasizing the short term yield too much, the absence of asset liability management and the conflicts between tactical asset allocation and objectives of asset management for insurance industry. Furthermore, this paper discusses the non-standard assets from their categories and features, which is the highlight of insurance asset management industry in2013. The author pays much attention to the risk-return tradeoff when analyzing their advantages as well as drawbacks.In addition, this paper proposes3ideas according to the problems:concentrating on long run benefits, incorporating ALM framework in strategic asset allocation and introducing Bayesian improvement to tactical asset allocation. Based on these3pillars, the author adopts long term asset allocation model, asset allocation model under ALM framework and Black-Litterman model adjusted for matching ALM framework to analyze the problems statistically and prove their feasibility.In the end, the author draws some conclusion from the comparison of3models, and makes some suggestions based on them. For the regulatory institutions, he underlines the importance of the perfection of non-standard asset investment supervision, the differentiated management of subsidiary account, the increasing supply of hedging tools and the completion of life insurance products system; For the institutional investors for life insurance accounts, he advices them to care about the long run return, enhance asset liability management while making strategic asset allocation, optimize the tactical asset allocation process and develop new investment channels.