With changes in the international economic and financial environment, the move towards a managed float was important to enable Malaysia to maintain a stable exchange rate against its major trading partners. Under this arrangement, Bank Negara Malaysia will now monitor the exchange rate against a currency basket to ensure it remains close to fair value. The transition to the new system has been orderly, with transactions mainly reflecting trade and foreign direct investment as well as portfolio investment activities. As providers of long-term capital and efficient risk transfer solutions for productive economic activity, the insurance and takaful sectors play an important role in supporting the economic transformation process. Over the years, that role has increased in prominence with the impressive growth achieved by the industry. In 2005, the insurance and takaful industries have continued to demonstrate resilience and strong performance despite challenging investment and underwriting conditions. Premiums and contributions have continued to expand at double digit growth rates in the first half of 2005, with the general sector rebounding strongly after two consecutive years of slow growth. The underlying fundamentals for sustainable growth have also strengthened with stronger solvency positions reported by the majority of players, continued profitability and improved underwriting discipline. The growth has also been accompanied by enhancements to the competitive structure, improvements in innovation and a greater degree of differentiation in the market, offering consumers a wider range of products and services.

In particular, the advent of bancassurance and bancatakaful has seen more players packaging life insurance and family takaful with innovative investment options that incorporate banking product features. Today, bancassurance and bancatakaful constitutes a significant feature of Malaysia's financial landscape, and continues to develop rapidly in terms of market reach and operational sophistication. The recent passage of the Insurance (Amendment) Bill on Financial Advisers marks yet another important milestone in ongoing efforts to achieve a more diversified market structure. With the legislative framework now in place, I am pleased to announce that Bank Negara Malaysia will soon be issuing licences for financial advisers. The introduction of financial advisers in the Malaysian insurance industry will further diversify the distribution system for life insurance. Corporate bodies with a minimum paid-up capital of RM100,000 will be eligible to apply for a financial adviser's licence. Similar amendments to the Takaful Act 1984 will be undertaken in the near future within the context of more substantive and wide-ranging changes to the current legislation. Our foundations for financial stability will also continue to be strengthened with the ongoing evolution of a more diversified and balanced financial structure. Today, Malaysia stands at the forefront in the provision of comprehensive Islamic financial services covering banking, takaful, and the capital and money markets. In the area of takaful, Bank Negara Malaysia continues to undertake initiatives aimed at developing significant market players that are able to compete effectively and efficiently.