The aim of the ALM model is to optimize the management of investments in accordance with the specific business characteristics and the accounting and regulatory requirements.
In contrast to life insurance, the actuarial interest rate of pension plans and some pension funds is not a hard guarantee. In the case of pension funds, the actuarial interest rate can be reduced for existing contracts.
In the event of long-term low interest rates, the liabilities must be subsequently reserved. Even in the case of rapidly rising interest rates, the so-called additional interest reserve increases, e.g. for life insurers and competitor pension funds, due to a moving average method.
Pension funds can finance the additional reserves by increasing contributions and reducing benefits.
In the case of life insurers, the Minimum Allocation Ordinance regulates the distribution of surpluses between shareholder and policyholder as required by supervisory law.
ALM optimization should essentially pursue two HGB objectives:
1. the avoidance of a loss and thus an additional contribution by the shareholders or the parent company
2. the achievement of a certain target surplus participation (for life insurers).
ALM analyses can be performed either deterministically in specific capital market scenarios or by means of stochastic analyses.
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