What does it mean in Page 513 Vol II, when it says that the ALM focus of life insurance companies requires major bondholdings to offset the interest rate sensitive nature of most life insurance liabilities?
I thought the liabilities were an actuarial assumption, based on a composite life expectancy and yearly contributions, their PV should change with morality assumptions, not market interest rates. I’m confused.
Life insurance liabilities behave very much like long-term, fixed income bonds, so that’s why life insurers hold raftloads of long-term bonds.
Policy payouts happen over time and well into the future, so you discount those projected payments with interest, just like you would for the coupons and principal of a corporate bond.
BTW, I think you meant 'mortality" in your original post, correct?
death is just like a coupon payment right…
Yea, morality.
Turns out, life insurance policyholders accumlate their contributions (never knew that), and could redeem their wealth if interest rates go up, and invest in something else that would give them more money over the long term, and upon death to leave behind. That’s why their liabilities are interest rate sensitive 
Whole & universal life. not term
Policyholders taking out whatever cash surrrender value they have in their contract to reinvest elsewhere at higher rates is called disintermediation; the interest rate sensitivity from the syllabus is just the good old inverse relationship between present value and interest rates.
Whole life and universal life do have a cash surrender value feature, and term policies typically have 0 cash surrender value, except for Term to 100 that may have a deferred CSV.
MIght have missed that part. Term insurance is like a non-life insurance, so you only get paid when the beneficary dies, but does not acculmate the premiums, and the whole/universal life insurace behaves like a pension?
FTFY! 
Whole life and UL are a combination of a savings element and an insurance element. I could bore you to tears about how to price and value, but you should get back to CFA studying!!