Important Points for IC 99 - Asset Management Exam
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Strategic risk is not managed through ALM.
The IRDA in its circular on Asset-liability management has clearly specified that "ALM is the practice of managing a business so that decisions and actions taken with respect to assets and liabilities are co-ordinated. ALM is relevant to, and critical for, the sound management of the finances of the insurers that they invest to meet its future cash flow needs and capital requirements."
ALM program enables insurance companies : to manage professionally, the funds generated by the insurance business - maximising risk adjusted returns and - to meet the regulatory requirements on its assets and liabilities ensuring the protection of policyholders interests as well as interests of other stakeholders.
Asset-liability management is not only a formalisation of risk analysis but also includes a way to quantify and manage various risks.
ALM deals with planning, direction and control process of financial risks management with proper portfolio analysis at various levels, situations, changes and mixes of assets, liabilities, and capital.
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