A Stochastic Programming Approach for Asset and Liability Management of National Health Insurance Fund in Tanzania

Several studies have reported about sustainability issues of the National Health Insurance Fund (NHIF) due to a mismatch between assets and liabilities. Despite these studies, no study has worked on the asset and liability management (ALM) of NHIF. In response to that, we applied a stochastic programming model to devise a decision framework that proposed an appropriate funding strategy to ensure financial sustainability of NHIF over the next 10 years. The model was formulated based on the regulations of Tanzania, with scenarios for random parameters generated by ARIMA and VAR models. We also performed convergence and stability tests to determine the appropriate scenario tree for our model. Numerical results suggest that remedial contributions in some stages, along with formulating an investment portfolio that favors government securities and fixed deposits, promises financial sustainability of NHIF over the next decade.