Bermuda pushes asset liability management beyond cash-flow matching

Asset liability management (ALM) can do more than react as the Bermuda Solvency Capital Ratio (BSCR) pushes re/insurers to rethink risk and capital.

That’s according to a whitepaper from FIS, which argues that in an increasingly complex regulatory environment, ALM has evolved beyond simple cash-flow matching, intensifying demand for more sophisticated technology.

Through the BSCR framework, the Bermuda Monetary Authority (BMA) has introduced principles-based capital requirements alongside a need for more dynamic reserving models and heightened expectations around capital adequacy.

Re/insurers are increasingly expected to demonstrate how they manage interest-rate shocks, credit migration, liquidity risk and reinvestment strategies under coherent economic scenarios, the paper notes. Download a copy today into your inbox.

For Bermudian balance sheets, that creates a significant modelling challenge. Best estimate liability calculations rely on actuarial ALM projections capable of testing different asset values and assessing their impact across different scenarios.

“It takes comprehensive ALM analytics to meet the BMA’s stringent requirements,” the whitepaper says.

Yet the challenge goes beyond regulatory compliance. Actuaries and asset managers increasingly need to understand how decisions on one side of the balance sheet affect liabilities, capital and investment performance on the other.

Many re/insurers still rely on Excel or internally built models to manage parts of this process, potentially creating slower workflows, governance challenges and difficulties in reproducing and defending results.

The FIS whitepaper explores how more advanced ALM approaches can bring actuarial and asset management functions closer together, while helping re/insurers model increasingly complex portfolios and assess the impact of investment decisions on reserves and regulatory capital.

It also considers what comes next. As simpler annuity blocks become more crowded, FIS argues that a more integrated approach to ALM could help re/insurers move beyond compliance and risk management towards identifying new opportunities for capital deployment and growth.

How can re/insurers make that transition, and what does a more integrated approach to ALM look like in practice?

Download the full white paper to explore the analysis and recommendations.

FIS has also published a separate white paper exploring how AI is reshaping insurance risk management, including the implications for actuarial modelling, operations and decision-making. If you’d like to explore that topic further, you can download a copy here.

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