Portfolio Management Strategies for an Insurance Company

ABC Life Insurance Company specializes in whole life and term life insurance products. Due to recent changes in interest rates and regulatory frameworks, the company has decided to reassess its investment strategy to ensure it can meet future policyholder liabilities while also aiming for growth in its investment portfolio.

As the Chief Investment Officer, you are required to provide a comprehensive analysis of the key considerations when constructing an investment portfolio for an insurance company. Discuss how the liability structure influences asset allocation decisions, the importance of duration matching, and the risk management practices that should be employed. Additionally, address the potential impact of external economic conditions on investment performance and how the insurance company can adapt its strategy accordingly.