While the property and casualty insurers have been the hardest hit, life insurers are not necessarily spared as climate change has also taken its toll on human lives via natural disasters, epidemics and the like. While the global insurance industry has displayed remarkable resilience to withstand such record losses, the future remains fraught with uncertainties and the challenge is to ensure that risk management strategies remain adequate to counter the impact of unpredictable changes in global climate patterns. Allow me now to briefly share with you, some of the measures undertaken by Malaysia in responding to the evolving changes and challenges seen in the insurance marketplace. Firstly, in the area of structural reform, industry consolidation remains an area of priority for Bank Negara Malaysia in its efforts to foster a more competitive and resilient industry to harness economies of scale, expand distribution capacity, enhance business volume and exploit opportunities for cost rationalization. Secondly, the shift towards principle-based regulations and the implementation of a riskbased capital and supervisory framework in Malaysia provides a greater degree of flexibility for insurers to exploit business opportunities arising from the changing financial environment, whilst not losing sight of the inherent risks. Moving forward, Bank Negara Malaysia will adopt an increasingly differentiated regulatory approach where insurers that exhibit strong corporate governance and risk management practices will be given greater regulatory flexibility. Thirdly, the advent of bancassurance and bancatakaful has seen more players packaging life insurance and family takaful with innovative investment options that incorporate banking and investment product features.

Bancassurance and bancatakaful provide immense potential for further market penetration given the relatively higher level of public confidence in financial  4  BIS Review 123/2007  dealings with banks and the significant spin-offs that can be reaped through data mining arrangements with banks. Although bancassurance has become firmly entrenched in Malaysia (accounting for 45% of new business premiums in 2007), it also continues to develop rapidly in terms of market reach and operational sophistication. Fourthly, with the rapid technological advancements and increasing consumer demands for more efficient delivery of products and services, the Malaysian insurance industry has continued to transition towards information technology-driven solutions, as well as, leveraging on more efficient payment and settlement systems such as e-payments. This has significantly enhanced the delivery of personalized and customized insurance solutions, made possible through the utilization of new delivery channels, including those that are internet-based. In the area of general insurance for instance, the successful implementation of e-cover notes for motor insurance policies led to vast improvements in service efficiency, better enforcement of cash-before-cover regulations as well as reduction in premium collection fraud. In the area of capacity building, human capital development is key to the future development and growth of the financial sector. As competition intensifies, the role of human capital in defining the areas of comparative advantage will become more prominent.