The current reforms in the motor insurance sector will introduce far-reaching changes in a key segment of the industry, with significant implications for the business strategies of insurers and their approaches to risk management. With the introduction of a new scheme for basic motor insurance cover, pricing for non-statutory motor insurance will be gradually liberalised, thus removing price distortions. This will allow rates to adjust to underlying risk factors. This will also be accompanied by a holistic review of motor insurance practices and the supporting infrastructure to enable more scientific underwriting and improve claims management. Industry groups have been formed to study these issues and make recommendations for the smooth transition to this new and more competitive  environment, while at the same time improving practices across the entire value chain of the motor insurance sector. The groups have made good progress and the recommendations are expected to be finalised for implementation in the second half of 2010. A new blueprint for the financial sector Beyond this international financial crisis and economic recovery, a global shift is taking place that is resulting in an increasingly multi-polar world. In this new phase of globalisation, the concentration of economic power in the global economy will become more dispersed. Asia will be very much part of this new future that is emerging. As Asia’s importance as a growth centre in the world economy increases, three major trends can be expected to intensify going forward.

[5]  Helene Rey and Silvia Miranda-Agrippino find that US monetary policy moves can induce changes in risk premiums across countries, move the global financial cycle, and challenge the monetary policy autonomy of emerging market economies. [6] Three, there appears to be a short-term trade-off between price stability and financial stability. Macroeconomic theory and empirical evidence tell us that although there is no long-run trade-off between price stability and employment, there is a short-term trade-off. This is expressed as a “sacrifice ratio”, or the increase in the unemployment rate necessary to achieve a given reduction in the inflation rate. Likewise, could it be that while there is no long-term trade-off between price stability and financial stability, there is a short-term trade-off? In the current conjuncture, for example, there are concerns that monetary policy tightening to bring down inflation could trigger contagious financial failures. Is there an analogous “sacrifice ratio” between price stability and financial stability? These short-term trade-offs call for a mix of monetary and macro-financial policies to meet the twin goals of financial stability and price stability. Combining the use of monetary policy and macro-financial policies can mitigate tradeoffs between objectives. Studies by both the BIS and IMF have found that policy combinations can be more effective than using a single instrument. Claudio Borio and colleagues at the BIS find that when low inflation in advanced economies required loose monetary policies, tightening macroprudential measures through strengthening capital buffers helped mitigate risks to financial stability from increased risk taking and indebtedness.