As with all history, one can take different views on what happened in the past, why it happened and whether it has any significance for us today. Personally, I take three things from it: •  First, there is a sound public policy case for the regulation of insurance. But looked at in the very long context of insurance history, the state’s involvement in the direct regulation of insurance activity is a relatively recent phenomenon. •  Second, coming to the UK, a tidy-minded historian could easily identify some common themes which appear present in different phases of the British state’s involvement in insurance, and perhaps weave them into a coherent narrative. I am less convinced. With the exception of a consistent interest in being able to raise revenue from insurance activity, the motivations and philosophies which have guided the British state’s involvement in insurance matters seem to me to have varied very widely through time. The earliest phase of dispute resolution, the later phase of freedom with publicity, and our current phase of quite intensive prudential and conduct supervision seem to me to be very different. •  Third, although there are important technical differences between ICAS and Solvency II, the basic philosophy remains similar: market-consistent capital regulation coupled with supervision. I do not wish to underplay the huge efforts made by many people across the insurance sector in bringing in Solvency II, but compared to previous shifts in philosophy, the change appears quite modest.

This has contributed to a well-diversified economic structure and has increased the resilience of the economy to external developments. The financial sector has also seen significant transformation. The restructuring, consolidation, and internal rationalisation of the banking sector is now virtually completed. Governance and risk management practices have also been improved while structural enhancements have been made in the capital market, significantly enhancing its role in the financial system. A comprehensive and robust Islamic financial system now also operates in parallel with the domestic, conventional financial system. Against the background of strengthened economic fundamentals and financial system, Malaysia has taken the opportunity to sequentially deregulate and liberalise the financial system. This includes the introduction of a new interest rate framework that is market-driven,  1/2  the liberalisation of foreign exchange administration rules to promote greater efficiency and enhance risk management in foreign exchange transactions, and the introduction of new foreign players into our financial system. In July this year, Malaysia adopted a managed float for the Ringgit exchange rate to better position Malaysia to respond to structural changes in the global and regional environment. Under this arrangement, the Ringgit is monitored against a basket of currencies of Malaysia's major trading partners. In this world of greater uncertainty, there has been significant focus on the issue of surveillance and risks and vulnerabilities. Experience has shown that surveillance has improved policy performance as well as the ability to take pre-emptive action to contain the impact of disruptive and destabilising developments.