The recent floods in Thailand in 2011, was one of the costliest catastrophes in history. As insurance penetration rises across Asia, property insurers will face greater concentration of exposures to natural disasters. Life insurers will also be impacted in other ways, including higher incidences of diseases while also experiencing pressures on long term returns on investment. The insurance industry therefore needs to be able to manage such exposures as well as act as a catalyst for societies to adapt to such climate change. Risk management systems in particular, needs to be able to capture and aggregate exposures to such event risks in a timely manner. Also important is to incentivise efficient energy use through innovative product design and pricing. In addition, the industry needs to come together to seek out opportunities to partner with government and non-governmental organisations to facilitate improvements in urban planning, infrastructure design and building codes. BIS central bankers’ speeches  3  The integration of environmental and social considerations in insurers’ corporate strategies and operations will clearly become increasingly important to long-term sustainability. This must also include a sustained focus on financial inclusion to achieve balanced and equitable growth. Important is to ensure that all households continue to have meaningful access to financial products and services and that even for those that currently have financial access that they do not become financially excluded especially in an environment where financial products and services are becoming increasingly unaffordable or complex. It is estimated that up to 4 billion people worldwide require low-cost insurance protection.

In envisioning the future direction of the industry in our own region, it would be constructive for us to reflect on the evolution of the modern insurance industry and contextualise it to our own prevailing and prospective environment. The modern insurance industry came with the maritime expansion which accompanied cross-border trade activity, and the rapid urbanisation which saw significant human and economic losses experienced during the Great Fire of London. This led to the establishment of the first fire insurance company and the invention of the building blocks for life insurance as we know it today. Then, as societies became more affluent, endowment and with-profit policies grew in significance as instruments for savings. As industrialisation and urbanization intensified, the break down of traditional systems of social protection prompted the expansion of insurance products that covered retirement, accident, medical care and unemployment. Throughout the 20th century, business models have continued to evolve in tandem with the higher levels of financial literacy, rising consumer expectations and advancements in  BIS central bankers’ speeches  1  technology. As competition compressed margins, there was a migration beyond tied-agency and commission-based distribution models to include fee-based financial advisors and direct marketing. Bancassurance and the participation of retailers in insurance distribution have also allowed insurers to significantly expand their reach with lower cost structures, while specialisation along the value-chain enabled even greater efficiencies. This more diverse landscape has enabled a much wider and deeper penetration of insurance in the advanced economies.