The Measurement and Management of Interest Rate Risk

The intent of this paper is to provide some basic tools for the measurement and management of interest rate risk. Interest rate risk has been present in the P/C industry since inception of the first insurance policy. Recent (1980’s) results of the P/C industry have heightened the awareness of the importance of investment income and its associated risk. Proper management of this risk is a key to the economic success of a P/C company. The actuary should play an important role in the evaluation of this risk and in further developing management techniques. While this paper goes beyond the work previously published in CAS materials, there is much need for additional work in this area.