Asset and Liability Management in Insurance Companies (6 CP)
Prof. Dr. Helmut Gründl
The goals of the ALMI lecture are to understand asset and liability management strategies used in insurance companies, and to understand the new Solvency II insurance regulatory rules. The contents of the ALMI lecture are separated into three categories: Liability Management, Asset Management, and Asset Liability Management and Solvency II. The first part – Liability Management – focuses on topics such as risk pooling, insurance pricing, estimation of reserves, risk sharing, reinsurance, alternative risk transfer, and capital management. Students are supposed to understand the sources of risks in insurance companies, and to learn techniques to measure and limit these risks. For the Asset Management part, the lecture applies classic pricing methods as well as performance measurements to the insurance context. Specifically, in this part students are expected to practice knowledge such as Markowitz Diversification, CAPM, Performance Measurements, and Dynamic Financial Analysis. In addition, the second part offers insights into the regulatory framework for insurers’ investment policies. The last part – Asset Liability Management – integrates both asset management and liability management strategies to arrive at an integrated risk management of insurance companies. It aims to help students understand the motivation and importance of conducting ALM, and to further equip students with methodologies such as simultaneous and classic modeling based on the Markowitz approach. Furthermore, policyholders’ reactions on the default risks of insurers are also incorporated as one of the topics. We also discuss the envisaged Solvency II regulatory regime and its implications for ALM.