Matching technique aligning asset receipts with liability payments maturity by maturity, eliminating rate risk rather than neutralizing it locally.
Duration immunization protects net value against a small rate move and requires constant rebalancing. Cash flow matching aims higher: build a portfolio whose coupons and redemptions fall on the same dates and in the same amounts as the benefits to be paid. If the matching is perfect the level of rates becomes irrelevant, since no cash flow needs to be reinvested or liquidated before term, and reinvestment risk dies with it. Implementation runs into three concrete obstacles. Bond supply at the right maturities is limited beyond twenty or thirty years, while annuities run further. Liability cash flows are not certain, mortality and lapses shifting them. And the yield obtained is lower than under free management, which is the price of certainty. In practice insurers therefore combine strict matching over the early years, where cash flows are best known, with duration immunization beyond.
Life annuity portfolio run by a life insurer as of December 31, 2025. Cash flows over the first ten years, 62% of the present value of liabilities, are matched bond by bond within an annual gap of less than 1%. Beyond twenty years, the absence of euro sovereign issues at the needed maturities forces a return to duration immunization, and that slice carries the entirety of the company's residual rate risk.
cash flow matching, adossement flux à flux, appariement par les flux, dédicace de portefeuille