BuildinganALMsystemfortheInsuranceIndustry.pdfVIP

Building an ALM system for the Insurance Industry Marc Hansenne, Koen Van Huffel SOLID FINANCE Solutions (A division of SOLID Partners NV) Abstract ALM systems are having a breakthrough in the insurance sector. This is a response to factors as an increased variability of financial markets coupled with new insurance products and a fierce competition with the banking sector. In contrast with the banking sector, where ALM is since years a known technique, insurance companies have to build this know how. Moreover, the system and the organisation to make an ALM system operational must be implemented. We will give a brief discussion of what ALM is, and which components are needed, in order to guarantee a flexible and open system. We will see that ALM fits in a RISK management approach that monitors issues as performance, risk, solvability and liquidity. Given the major components of an ALM system (data input from a data warehouse, front-end, calculation box, report generator) we demonstrate why the SAS System offers an ideal solution as a platform to build an ALM system for your organisation. Introduction In today’s more and more aggressive markets it is of primary importance to know whether the products sold still give a positive contribution to the total value of the enterprise. The economical impact of an insurance contract is by its nature however only visible after years. The long term character of insurance contracts demands a thorough follow up of profit and losses for each individual product. Asset and Liability management is the management of the composition of the balance sheet with the aim to realise the company goals within given risk boundaries. The insurance industry, in contrast with the banking sector where, ALM is since years an accepted technique , starts to implement ALM systems for mid and long term use. Many insurers opt to build a tailor made system, since there are almost no integrated s