Mathematical provision for market interest rates

Actuarial liability corresponding to life insurance products is usually determined throguh the prospective method and using the same hypothesis employed to determine the premiums. Nevertheless, there is specific and extensive regulation in the European Union and Spain about the use of immunization procedures into the insurance business, which allow matching liabilities arising from life insurance contracts and financial assets. In this paper we develop the procedure to obtain the actuarial liability using two different immunization procedures: cash-flow matching and duration matching. We focus on developing a practical immunization model winch incorporates the specific constrains established by the Spanish Law. We underline the need to develop the technical bases which allows a correct and successful asset - liability management in life incurance business.