Incorporating policyholder expectations into ALM
European life insurers have recently improved their asset/liability management (ALM) skills.However, those efforts have been limited to the matching of guaranteed policyholder benefits.While bringing considerable insight, they also leave management with open questionsbecause policyholder expectations above guaranteed benefits have been neglected. JoachimOechslin, Matthias Aellig, Olivier Aubry and Jan Wicke suggest that such expectations shouldbe incorporated into ALM analysis, despite quantification difficulties. A model is proposed toachieve this, and the implications of the model are illustrated with the example of a Germanlife insurer. Concrete recommendations regarding investment strategy are discussed
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