Asset Liability
Management
Take ALM to the Next Level
Optimize performance on economic, accounting and regulatory bases.
Manage risk on multiple bases simultaneously and evaluate trade-offs.
Economic Reality
The fundamental objective of every insurance company and pension plan is to ensure assets will be sufficient to payout liability cash flows under any interest rate scenario.
Profit & Loss
While the long-term economic objective needs to be met, the immediate focus for many organizations is to maximize P&L and minimize volatility of P&L to interest rates and credit spreads.
Capital Efficiency
Many insurance company and pension plan portfolios are suboptimal and capital inefficient resulting in lower P&L, lower investment income and lower capital ratios.
ALM as a Powerful Tool to Run the Business
Many companies today are not being fairly compensated for risks they are assuming. Best practices that have emerged in the area of ALM have enabled insurance companies to use ALM as a strategic decision-making framework to add value, gain competitive advantage and achieve financial objectives. Nexus Risk Management works with insurance and reinsurance companies globally to implement best practice ALM frameworks, formulate effective ALM strategies and execute asset management within an ALM framework.
Nexus Risk Management does a wide range of ALM related work for life insurance companies worldwide. Our clients include some of the largest multinational insurance and reinsurance companies.
Risk Optimization
Traditional portfolio optimization techniques do not necessarily add value and may not achieve the financial objectives.
Nexus Risk Management has developed proprietary optimization algorithms that can help companies simultaneously maximize value and minimize risk.
Beyond Matching
Insurance companies and pension plans have learned it is not enough to use simplistic approaches to manage risk. Interest rate risk is complex, has many dimensions and is not the same across economic, accounting and regulatory bases.
A portfolio can be perfectly duration matched and still have significant interest rate risk exposure.
A portfolio can be perfectly immunized across all dimensions of the interest rate risk exposure on an economic basis and still result in losses due to interest rates or swings in required capital.
A portfolio can be perfectly immunized on an accounting or regulatory basis and still become insolvent.
A portfolio can be immunized across all dimensions and bases and be suboptimal.