Yet the considerable slack in productive capacity and the sluggish recovery in demand and activity across Europe suggest that inflation rates, while positive, will hold at moderate levels in the near future, with no risk of deflation discernible for the moment. Given the incipient pick-up in activity and the continuation of very modest levels of both actual and expected inflation, the official interest rate for the euro area, at 1% since last May, is at the appropriate level. Switching our focus to the Spanish economy, the decline in output in 2009 is not going to be sharper than in other countries, but the contrast with the growth rates of the ten previous years is more patent. The fact is, as I have explained on other occasions, the Spanish recession shares features with other countries, but has its own hallmarks, such as the real estate adjustment and the behaviour of the labour market. The powerful external contractionary forces generated by the international crisis compounded the internal adjustment on which the Spanish economy had embarked, exacerbating the decline in domestic spending and employment. The latest figures indicate that, as in the euro area and the rest of the world, the sharpest phase of contraction in the Spanish economy is now behind us. According to the data released some days back by the INE, activity slipped once more in the third quarter, unlike in other developed countries, although it did so at a quarter-on-quarter rate of 0.3%.

Allianz strives to support its businesses with sufficient capacity to underwrite risks. The establishment of the Singapore branch of Allianz Global Corporate and Specialty in 2011 reflects a deep commitment to build underwriting capacity in the Asia-Pacific. In the same way, to be the premier specialist insurance market in Asia, Singapore must deepen its underwriting expertise in reinsurance and specialty insurance with an Asian focus. Two, Profitability. Allianz seeks to be profitable through its operating businesses alone, so as to be as independent as possible from volatility in the financial and capital markets. The global insurance industry continues to face pressure from weak economic growth, soft pricing and persistently low investment yields. Insurers can no longer rely on investment income or rate increases alone, to compensate for weak underwriting. Likewise, even as Singapore’s insurance industry diversifies the span of its activities to include capital markets, it must continue to stay focused on core competencies in underwriting insurance risks. High underwriting standards are critical for sustainable growth. Three, Internal Capabilities. Allianz aims to reduce complexity by focusing on core activities, reducing structural inefficiencies, and streamlining processes. Likewise, in seeking to strengthen its value proposition as a specialist insurance market with a deep appreciation of Asia’s risks, Singapore’s insurance industry must invest in Asia-focussed data, research and analytics. Singapore has achieved a good head-start in a number of areas, such as SMU’s Centre for Silver Security for longevity risk and NTU’s Institute for Catastrophe Risk Management for catastrophic risks. We must continue to build on these capabilities.