Title: New asset liability management model with decision support system for life insurance companies: interface design issues for database and mathematical models

Authors: Harish V. Rao; Goutam Dutta; Sankarshan Basu

Addresses: International Management Institute, New Delhi, 110 016, India ' Production and Quantitative Methods Area, Indian Institute of Management, Ahmedabad, 380 015, Gujarat, India ' Indian Institute of Management, Bangalore, 560 076, India

Abstract: We introduce a new asset liability management (ALM) model based on decision support system (DSS) for a life insurance firm. The DSS is based on multi-stage stochastic linear programming (SLP) with recourse for strategic planning. The model can be used with minimal knowledge of management sciences. The model maximises the expected value of total reserve (policy holders' reserve and shareholders' reserve) at the end of the time period of planning with constraints both on the asset and the liability side of the firm's balance sheet. We discuss issues related to DSS interface design, one to one correspondences between the SLP model and the database and the difficulty in multi stage DSS compared to two stage DSS. We also compare and contrast the similarities and differences with our earlier work on SLP based DSS for process industries.

Keywords: DSS; decision support system; stochastic optimisation; financial institutions; strategic planning; ALM; asset liability management; insurance.

DOI: 10.1504/IJRM.2018.096319

International Journal of Revenue Management, 2018 Vol.10 No.3/4, pp.259 - 289

Received: 24 Mar 2017
Accepted: 26 Feb 2018

Published online: 26 Nov 2018 *

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