Asset Liability Matching for Property/Casualty Insurers

Asset-liability matching, long known to life insurers, is currently being investigated by casualty actuaries. Several crucial differences between life and non-life insurance operations require modification of traditional immunization and duration matching techniques when applied to Property/Casualty insurers. The author highlights major areas of distinction between life and property/casualty insurance. A superficial acquaintance with asset/liability matching theory would indicate a short duration fixed income asset portfolio to back a Property/Casualty insurer's liabilities. A more careful consideration of the factors discussed in the paper indicates a portfolio of equity securities and long-term bonds. Key words: inflation, asset-liability management, matching, duration, common stock, bonds, interest rates.