Asset and Liability Management (ALM) is the practice of managing a business so that decision and actions taken with respect to the assets and liabilities are coordinated. ALM is an integral part of the broader risk management. As such, ALM considerations should be taken in a variety of strategic decisions such as:
- The Strategic Asset Allocation (SAA);
- The distribution of discretionary profit-sharing;
- The design and pricing of new products;
- The dividend distribution policy;
- The hedging strategy and the use of derivatives.
These decisions are supported by analysis performed with the help of sophisticated quantitative tools and models. A lack of a proper ALM and of its associated tools, can lead to large unexpected losses and even to the bankruptcy of the insurance company.
What Detralytics can do for you
Detralytics can assist you on a number of fronts. From a modelling perspective, we can help you:
- To challenge your current ALM model(s) and suggest improvements;
- To implement changes in your ALM models such as
- the modelling of new products, the modelling of new asset or security types, the modelling of a more realistic and dynamic investment strategy, etc;
- the modelling of a new regulatory or economic environment like for instance the implementation of the new IFRS rules in your ALM models.
- To review/validate your ALM model(s) as a sub-part of your SII internal model.
From a more business perspective, we can also
- Review and challenge the appropriateness of your ALM studies. We can for instance review and challenge your strategic asset allocation, your hedging strategy, etc.;
- Advise you on how to better embed ALM considerations in your different processes, for example in the design and pricing of new products;
- Support your team in their reporting.
Detralytics actuaries have worked on different assignments in ALM. In particular, they helped a major Belgian insurance companies to improve its ALM projection model for its life insurance business, they designed projection models for different life insurance products, for an international financial software vendor. Finally, they validated the ALM model of a large Belgian insurance company as a part of its Solvency II internal model.