What strategy might an insurance company employ to ensure that it will be able to meet the obligations of annuity holders?

Question

Quizplus · Accepted Answer

Cash flow matching is the strategy of investing in assets that generate cash flows that match the future obligations of the annuity holders. This ensures that the insurance company will have the necessary funds to meet its obligations to the annuity holders. Index tracking, yield pickup swaps, and substitution swaps are not methods specifically designed to ensure that the insurance company can meet its obligations to annuity holders.

What Strategy Might an Insurance Company Employ to Ensure That