the uncertainty inherent in future plans. It provides the tool to measure the distribution of key variables of particular concern to decision-makers. This enables managers to examine the likelihood of different developments, which cannot be addressed by conventional financial planning.Though ALM is an important tool, it lacks a uniform approach and is quite complex. ALM allows insurers to determine the overall risk exposures arising from different activities, but does not assess sources of risk. It only offers a framework for collecting information about risk exposures and assessing these exposures on a consistent basis. ALM can not help with risks that are not identified. As with any model, a practitioner should be aware of the model's strengths and weaknesses, because none of the models offer a perfect representation of reality.CONCLUSIONHistorically, the insurance industry has depended on investment income to generate returns. Therefore it is very important for an insurance company to manage investment risks. Every insurer faces a different exposure to each of these risks, depending on its business mix. In all its activities, an insurer must decide how much business to originate, how much to finance, how much to reinsure, and how much to contract to agents. In so doing, it must weigh both the return and the risk embedded in its asset and liability portfolios.The uncertain nature of liabilities makes it more difficult for insurers to manage their risk exposure. This paper has examined the asset-liability management as the tool of interest risk management, which is the core risk for investment decisions. ALM can help insurers operate not only more soundly, but also more profitably.Although ALM tools have limitations, rating and regulatory agency interest in them suggest that their use will continue to spread. Technological progress in the capture and transfer of data has made increasingly sophisticated risk management systems available...
