the terms of their policies. on the contrary, our responsibility, after the crisis we have experienced, is to better protect the rights of policyholders, and by that i mean all policyholders. the sole purpose of this measure is to enable us to protect french savers in the event of serious and exceptional threats to financial stability. if ever it were needed, we would be sure to use it appropriately and in the collective interest. ii. second major challenge for the insurance sector : the complete overhaul of the regulatory framework the solvency 2 directive came into force in the european union on 1 january this year after 10 years of difficult negotiations. despite what critics say, this overhaul of the regulatory framework was necessary. the previous framework, which dated back to the 1970s, was no longer adequate. it did not take into account the true nature of risks : capital requirements, for example, were independent of asset allocation. the new supervisory framework now includes requirements relating to governance, cooperation between european supervisors in the same group, reporting and transparency vis - a - vis the market. the principles of solvency 2 are not perfect but they do represent genuine progress : investment freedom in return for compliance with the " prudent person " principle, joint valuation of insurance assets and liabilities, and the taking into account of " long - term guarantees " to mitigate the effects of financial market volatility on capital. that said, there are a number of developments that would be desirable. a review phase of the standard formula and the long - term guarantee package is page 6 sur 7 scheduled at the european level for 2018 - 2020. this step provides an opportunity for improvement in at least three areas : - firstly, the simplification of the regulatory framework. the complexity of the standard formula is neither desirable for the industry which has to produce these new calculations, nor for supervisors, nor for financial markets. - secondly, insurers should remain a genuine lever for financing the economy. the insurance sector is the largest institutional investor in the european union, with almost eur 9, 800 billion invested in the economy in 2015. you have often brought this issue up with me... and it has now been clearly identified at the european level. there are already plans for improvements in two areas, upstream of the review phase : infrastructure corporates on the one hand – eiopa has proposed a revision ; highquality securitisation products on the other. more generally, it is essential to consider the potential deterrent

how can an organization use new technology to restructure its business and managerial practices? and what incentives drive that restructuring? well, the most obvious incentives are the need to maintain a competitive edge, the desire for profit, and the fear of going bankrupt. that is why economies that have intense competition in domestic markets — from both domestic and foreign firms — are the most innovative. indeed, competition encourages both product and process innovation. but innovation means taking risks. enterprises must also be given the incentives to take those risks. and they should be rewarded by the market when they do so. among other things, this requires a financial system that appropriately prices the risks and potential returns being taken on by investors. finally, we know that innovation is not a government - driven process : it occurs on the shop floor, in the start - up's laboratory, and in the minds of entrepreneurs. in our businesses and public sector institutions, we need to develop a culture that encourages both the " eureka! " moments and the incremental improvements that come from the incentive to stay just one step ahead of the competition. productivity through efficient allocation let me now talk about improving productivity through more efficient allocation of resources. some of the policies that promote better resource allocation are the same ones that encourage innovation. let me mention four elements that are critical. first, we need an appropriate legal framework of property rights, including intellectual property and contract law. this framework must also include suitable penalties for those who break these laws, breach the public trust, or commit fraud. second, labour markets must operate efficiently, encouraging the flow of resources from lessproductive to more - productive uses, and from shrinking sectors to growing ones. this flexibility is encouraged through appropriate labour market policies, education, and training. i won't say more about this — recent research by the international monetary fund and the organisation for economic co - operation and development explores this issue thoroughly. the third critical element is a financial system that operates efficiently, helping to allocate scarce economic resources to the most productive uses, in the most effective way. in previous speeches, i spoke about the importance of a well - functioning financial system and about the need to support the efficiency of our financial institutions. i also spoke about the need to promote efficiency in the regulation of securities markets and about the role that canada's pension system can play. 2 / 4 building the right infrastructure the fourth key element is the construction and operation of the physical infrastructure that we need for economic growth and development