ALM and In-force Value

Support for the assets in relation to liabilities

Supported Processes

The integrated management of the insurance business in the choices of short or long

periods relating to the optimal structure of assets in relation to liabilities is supported by

the analysis of the Asset Liability Management (ALM) made by SimCorp Sofia.

SimCorp Sofia modules:

ALM

The functionalities of the ALM module of SimCorp Sofia allow the user to conduct an integrated analysis of assets and liabilities for both Life and Non-Life businesses. The quantification of the mismatching in terms of amounts and expiries with respect to portfolio policies completes the range of analyses available to the user. In order to facilitate the conduction of sensitivity analysis, all the hypothesis formulated with respect to a forecast (rates curves, investment strategies, exogenous cash, forecasts on dividends, forecasts on policies) can be saved in a specific archive. These can also be recalled if needed in order to repeat the calculations of the forecasts with possible modifications of the hypothesis previously formulated.

Asset side:

SimCorp Sofia provides the users with the advantage of being able to conduct an analysis of the
values and of the perspective flows by having on hand data with an elevated level of detail, even down to the single holding. Furthermore, the projections are carried out on the same data reference database used for management and administrative elaborations.

Liability side:

It is possible to integrate into SimCorp Sofia the management data of policies portfolios and to calculate the relative flows (premiums and outgoings for expiry, redemption and claims) by defining models of policy-cluster having the same characteristics (rate, duration, anti-duration, mortality tables, etc.).

The ALM module can also be used for budget forecast, by circumscribing the analysis to financial asset portfolios. A stochastic ALM module, based on Hull-White model for bonds market and on Black-Scholes model for shares market, is also available.

The module allows to launch simulations on a big number of scenarios in order to measure the response of a portfolio to peculiar economic conditions.

Overall simulations results and details of each scenario can be investigated with the help of interactive graphs.

In-force Value

Based upon the rates of expected yield determined by ALM, SimCorp Sofia calculates the In-force Value of single policies for portfolios of the Life business and obtains the current value of the policies portfolio already acquired (business In-force) for an insurance company. The results of the calculation of the business In-force Value contain valuations of the contribution margins for different movement types (redemption, mortality, fee for assets management, premium loadings), thus allowing users to analyze the sensitivity and the variation of value between two diverse valuation periods.