In isolation, higher carbon prices could carry the risk of households facing higher prices, without being able to switch their consumption expenditures towards greener technologies. Strong public and private investment efforts are therefore needed to prevent consumers from being locked into carbon-intensive technologies. Public investments can serve a catalytic function in this context. Infrastructure investments, for example for charging electric vehicles, can trigger wide-ranging changes in the type of energy mix used in public and private transport. The coronavirus crisis offers a must-seize opportunity. The costs of letting the current crisis go to waste would be exceptionally large, for two main reasons. First, business dynamism in Europe has been comparatively weak for a long time (see figure 3). There are considerably lower shares of both growing and shrinking firms than in other advanced economies, holding back productivity growth as well as technology creation and diffusion. [6] Put simply, new firms are more likely to adopt new and greener technologies, and we are not seeing enough of them in Europe. Figure 3 New business creations (thousands)  Notes: Number of new businesses created outside of agriculture (FR, DE, IT, ES), and number of business applications outside of agriculture (US), 12-months rolling average. Data for France excludes sole proprietorships. US data has been transformed from weekly to monthly, data for Italy from quarterly to monthly and data for Spain from annual to monthly. Data for Spain available only until 2018. Sources: INSEE (FR), Destatis (DE), Banca d'Italia (IT), Census Bureau (US) and INE (ES).

Also contributing to the growth opportunities for risk products is the growing preference among the more sophisticated consumer segments for unbundled investments and protection solutions which offer greater flexibility with investment choices, without affecting protection levels. Amidst these prospects and as the financial services industry transitions to a more deregulated and market-driven environment, the regulatory and supervisory approach will continue to evolve into one that is more principle and risk-based, providing greater operating flexibility to insurers. In this regard, the proposed risk-based regulatory regime which includes the new risk based capital framework that is going to be introduced in due course is a move in this direction. This would further strengthen the incentives for improved risk management practices of insurance companies. The new requirement would also facilitate more efficient capital structures that are more reflective of the different risk profiles of individual institutions, whilst providing greater investment flexibility to insurers without compromising on prudential standards. Such insurance companies would be well-positioned to reap the opportunities abound in the insurance market place. Under this risk-based regulatory regime, the responsibility for the implementation of sound risk management and market conduct governance, as well as assessment of risks and management of the financial condition of an insurer, will increasingly rest with the Board of Directors and Senior Management of the insurer. This will ensure that the financial system is able to continuously adapt whilst maintaining a clear focus on sound risk management that will continue to be a critical pillar to support a resilient insurance industry.