For the life of me, I cannot figure out what the hell this is? Can someone help me understand this approach and what this term even means? Is this just simply - you are a life insurer with contingent liabilities. You manage all of your assets using MVO?
I guess, I don’t get why the term surplus is being used here…
Are you referring to surplus optimisation? The Life insurance company covers it’s liabilities with assets via liability driven investing, a lower risk approach as their risk tolerance is lower for this part of their portfolio.
They use MVO to manage their surplus which is any assets above their liabilties: surplus = assets - liabilities