For insurance, we expect that this will be mostly targeted at conduct rules where a more proportionate approach could be taken to reduce compliance costs for insurers to introduce innovative solutions in areas where we believe the risks to consumers are low. The third area of focus will be to develop a more coherent approach, particularly across agencies, for ensuring legal and regulatory compatibility with new innovations in insurance. This includes addressing issues that may arise in legal constructs, for example, smart contracts, liability issues associated with robo-advice or driverless cars, and strengthening defences against cyber threats and abuses by criminal elements. Regulatory framework and priorities: Laying the foundation for a stable and welldeveloped insurance sector My third message today relates to the regulatory priorities and framework to ensure the stability and development of the insurance sector. Stability and development are not two contradictory goals. Since the supervision of insurance was brought under the Bank’s ambit in 1988, the industry has come a long way. Building on the stronger foundations in the industry, in the more recent period, we have embarked on a broad range of reforms to further develop the full potential of the industry to better serve the economy. One of the recent significant policies we have put in place is the Life Insurance and Family Takaful Framework (LIFE Framework), which was introduced in 2015. One of the three core pillars of the LIFE Framework is to promote product innovation while preserving policy value.

The effects are more pronounced among lower income groups and micro- and small businesses that are disproportionately impacted by events such as the death or incapacitation of a breadwinner, or business disruptions. Insurance and takaful therefore play a critical role in reducing inequality. This is key and growing risk can be seen in economies that are becoming more prosperous, and at the same time more divided. A well-developed insurance sector also contributes to wider economic efficiency and resilience. At a time where global developments can have a far greater impact on domestic economic performance, it is important for countries including Malaysia, to continue to develop our growth potential through further diversification into new and higher value-added economic activities. Insurance facilitates this by allowing businesses to take risks, without which we cannot have innovation. It also enhances access to financing. This is possible because insurance has the ability to pool, assess and assume risks that are outside the expertise and capacity of banks or businesses themselves to bear. Such examples would be weather-related crop and property insurance, key people risks or product liabilities. Premiums that are paid for insurance also act as strong incentives for businesses to improve risk management, which in turn, increases business resilience. Of course, insurance also plays a key role in the development and resilience of our financial markets. In these recent episodes of heightened market volatility, insurance and takaful companies, alongside banks, have had an important stabilising effect on markets.