It will also enhance public confidence in the efficiency and performance of the financial system to contribute to the overall development of the economy. This approach is also a move towards a differentiated regulatory and supervisory approach whereby companies that demonstrate strong corporate governance standards and risk management practices will be accorded 'lighter regulatory touch', which implies that they will be given greater regulatory flexibility. This underscores the importance of capacity building by the financial institutions in research and development and re-engineering of business processes in search of operational excellence and enhanced customer service delivery. A strong culture of excellence is therefore vital: one that is embedded in all levels of the organisation; one that fosters and rewards innovation and service quality. A customer-centric focus is, and will continue to be, the winning formula for a successful financial services provider. In particular, insurers must ensure suitability of products sold or advice given; play an active role in enhancing financial capability of consumers; and ensure policyholders are treated fairly. This regulatory approach will basically benefit those companies that are efficiently-run and wellcapitalised. In this regard, Axa Affin will benefit from this new regulatory approach if it puts in place a risk management system that could be used to capitalize incentives accorded by the new framework. The synergies derived from the strengths of the bank and the experience of foreign insurance partner should be harnessed to benefit from this new environment, particularly in the bancasurance line of business.

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.