The issue is also of interest to the authorities responsible for financial stability. As standardised risk-transfer instruments develop, they are likely to come into wider use. So far, market participants have not properly identified or analysed the likely knock-on effects, whether direct or indirect. For this reason, there is a vital need for improvements in the prudential reporting and market transparency of these transactions; there is also a need for greater harmonisation of the rules and regulations applicable to institutions in different countries and to different types of company. The aim should be to record the risk where it is actually borne, both economically and financially. In addition, the authorities responsible for different financial sectors must coordinate their efforts to jointly identify where risks lie and to measure their extent. The Banque de France and the Commission Bancaire are working to that end with their counterparts in the insurance industry and the securities markets. 3.2  The future solvency ratio will better reflect the economic realities of banking risk  The finishing touches are being put to the solvency ratio, due to come into force in 2006. The new ratio will cover a broad spectrum of activities and risks, based on an approach tailored to the degree of sophistication of financial market participants, both in the G10 and beyond. From a prudential standpoint, the ratio will capitalise on the progress already made in improving risk supervision and control, while making it easier to compare methods at the international level.

The idea here, is not to view the insurance industry’s stability in isolation, but to be seen within the wider context of preserving social and economic value of insurance systems. A new paradigm on ethics Technological advances and scientific breakthroughs have opened new possibilities to operate and deliver products to customers. Technological innovations will make customers better off but insurers on the hand, may be confronted with some fundamental ethical issues. For insurance companies, this requires a rethinking of professional and ethical standards. Thus, a need for a new paradigm on ethics. For example, with greater ability to aggregate and analyse more data from multiple sources, questions arise on the extent insurers should consider using genetic and social preferences in underwriting. Or whether it is acceptable to commit someone to a long-term financial undertaking when they may not fully comprehend the implications of their choices even though insurers might truly believe it is ‘good’ for them. And then, there is always the dilemma and trade-offs in directing more resources toward social impact investments, in cases where it lowers risk-adjusted returns for policyholders. As advancements in technology brings about various unknowns and a blurring of business lines, professional and ethical standards need to be embedded into our DNA to ensure the integrity of 3/5  BIS central bankers' speeches  our industry. When it comes to ethical values and conduct, we must move beyond conceptual discussions to practical applications. Time and effort must be undertaken to raise the standards of competence and developing well-defined codes of behaviour.