20.1 Introduction

Asset-Liability Management \(\neq\) Matching

• ALMatching: focus on hedging interest rate risk by matching duration or cashflow matching

Definition 20.1 (AL Management)

• Looks at current assets and liabilities + flow from future premiums of a going concern company

• Identify and exploit hedges of any sort

  (e.g. use equity as inflation hedge)

Insurance liabilities are less liquid than investments \(\leadsto\) Focus mostly on investment

• With that said, company can still consider u/w and other hedges like reinsurance (that manages the liability instead)