Mohd Razif bin Abd Kadir: Malaysia’s life insurance industry Speech by Mr Mohd Razif bin Abd Kadir, Deputy Governor of the Central Bank of Malaysia, at the official launch of Axa Affin Life Insurance Berhad, Kuala Lumpur, 30 January 2007. *  *  *  It is indeed an honour to be here this morning to witness the launching of Axa Affin Life Insurance Berhad. The launch of Axa Affin Life Insurance Berhad today marks an important development where two players from different financial industries, i.e. Affin Holding Bhd and Axa Asia Pacific Holding Ltd., forge a strategic alliance to attain synergy for mutual business advantage. I wish to congratulate both companies on this momentous event. Ladies and gentlemen, The financial landscape had undergone tremendous transformation in the last decade. The life insurance industry continues to sustain strong performance amidst challenges in a competitive environment. The evolution in the financial landscape saw a shift in customers' preference, emergence of more complex products and increasing diversity in delivery channels. The growing acceptance by the insuring public for financial protection in the form of insurance coverage has gained prominence especially for investment linked products which currently commands a market share of more than 40% of new business. This period also witnessed the growing importance of bancassurance as a channel for marketing life insurance products. The life business written via the bancassurance channel currently accounts for almost 50% of the new business written in the life insurance sector.

Also contributing to the growth opportunities for risk products is the growing preference among the more sophisticated consumer segments for unbundled investments and protection solutions which offer greater flexibility with investment choices, without affecting protection levels. Amidst these prospects and as the financial services industry transitions to a more deregulated and market-driven environment, the regulatory and supervisory approach will continue to evolve into one that is more principle and risk-based, providing greater operating flexibility to insurers. In this regard, the proposed risk-based regulatory regime which includes the new risk based capital framework that is going to be introduced in due course is a move in this direction. This would further strengthen the incentives for improved risk management practices of insurance companies. The new requirement would also facilitate more efficient capital structures that are more reflective of the different risk profiles of individual institutions, whilst providing greater investment flexibility to insurers without compromising on prudential standards. Such insurance companies would be well-positioned to reap the opportunities abound in the insurance market place. Under this risk-based regulatory regime, the responsibility for the implementation of sound risk management and market conduct governance, as well as assessment of risks and management of the financial condition of an insurer, will increasingly rest with the Board of Directors and Senior Management of the insurer. This will ensure that the financial system is able to continuously adapt whilst maintaining a clear focus on sound risk management that will continue to be a critical pillar to support a resilient insurance industry.