Insurance Portfolio Liability Matching

ABC Insurance Company is facing a significant challenge in aligning its investment portfolio with its liabilities, which predominantly consist of long-term life insurance policies. Recently, the company has observed an increase in claims due to unforeseen events. Their current asset allocation is heavily weighted towards equities (60%), with the remaining portion divided between government bonds (30%) and alternative investments (10%).

In light of the increased liabilities, the chief investment officer is considering a strategic shift in the investment approach. With the goal of achieving better liability matching and reducing the risk profile of the portfolio, the CIO is contemplating the following options:

1. Increasing the allocation to long-duration government bonds.

2. Reducing the equity exposure to 40% and reallocating the proceeds to cash equivalents.

3. Investing in high-quality corporate bonds with a similar maturity structure to the liabilities.

Given the nature of the insurance company's liabilities and the need for strategic asset-liability management, which of the proposed options is the most appropriate to enhance the matching of assets to liabilities?