Analyzing Asset Allocation Strategy for Insurance Companies

As the Chief Investment Officer (CIO) of a mid-sized insurance company, you have been tasked with reviewing the current asset allocation strategy in light of recent regulatory changes and evolving market conditions. The company primarily sells life insurance policies and has a long-term liability structure. These factors, along with the need to optimize returns while ensuring sufficient liquidity and stability of the portfolio, are critical considerations.

Your board has requested a detailed analysis of how these regulatory changes impact your investment strategy, focusing specifically on the asset classes suitable for life insurance companies. In your response, discuss the implications of these changes on fixed income and equity allocations, as well as any potential alternatives that should be considered. Additionally, provide a recommendation for future portfolio adjustments based on your analysis.