Long-term interest rates rose in the US and emerging market yields increased even more, reflecting a reversal in risk appetite. The prospect of Fed tapering became a key consideration for monetary policy in emerging market countries. In most countries monetary policy remained tight in order to lean against excessive currency depreciation; a few countries raised their policy rates in an attempt to stem capital outflows. For some countries, as economic activity softened and inflation fell, monetary policy may have ended up being tighter than intended as a result of tensions caused by policy spillovers. At this juncture, the key question is how to design or adjust policy frameworks to cope better with global interconnectedness while preserving monetary policy independence. I hope the conference will help shed further light on this. In doing so, we have to be mindful that global liquidity conditions will continue to largely depend on the macroeconomic conditions of the reserve-issuing countries. Currently the US dollar dominates the international reserve system as a safe asset. The continuation of this role rests on some basic requirements. A reserve-issuing country has to illustrate a good track record of prudent macroeconomic policy. And as recent events have reminded us, there is a large fiscal element to this. One cannot separate the status of a reserve currency from the solvency of the sovereign. The use of the US dollar as an international store of value and medium of exchange very much depends on the continued credibility of the US Treasury in honoring its debt obligations.

•  Secondly, the dynamics of the market place have already resulted in alternative marketing approaches to the traditional agency system, including more cost effective distribution channels like bancassurance. This concept has gained acceptance worldwide for the provision of a wide range of life and pension products via the distribution networks of banks. BIS Review 123/2007  1  •  Thirdly, globalization of the world economy and financial markets, as well as trends towards greater financial innovation and promoting shareholder value, have contributed to a wave of mergers and acquisitions between insurers, banks and asset management companies resulting in the emergence of financial conglomerates. These integrated entities will inevitably raise the bar in the entire business value chain, including product design and pricing, streamlining of distribution channels and integrating valuable databases of customer information, thus accentuating further competitive pressures within the life insurance markets in the region. •  Finally, an area that will present significant opportunities as well as challenges to the insurance industry will be the evolving structure of social security systems and safety nets that will have to keep pace with demographic changes as well as the rising cost of medical care. Many nations are already finding it difficult to provide adequately for the needs of the aging population through state provided social security. It has been reported that globally, life insurance premiums amounted to USD2,200 billion in 2006, and Asia as a region is the fastest growing life insurance market, in line with rapid economic development and growth.