agents ) to comply with training requirements focused on their areas of expertise and mandated by the internationally renowned chartered insurance institute ( cii ). at the same time, however, customer service is primarily the responsibility of the firms themselves. the regional insurance market is becoming highly competitive as we see more entrants, both established international firms and local companies, offering a growing range of services, including medical and life coverage. although insurance penetration rates in the region are still relatively low, in the long run not all the firms currently competing in the market will be able to build viable franchises. those that do will be the ones that can offer their customers the best standards of service. this will not mean simply competing on price, particularly if it means cutting premiums to levels that are simply not viable in the long run. good customer service has many different dimensions. it includes, for example, ensuring that at the point of sale the firm ’ s representative is well trained, knowledgeable about the products, and places the customer ’ s interests first. it involves devoting resources to the development of new products that can meet customer needs. it also involves ensuring that policy - holders receive quality and reliable service when presenting their claims. the firms that will emerge strongest from the current highly competitive environment will be those that are capable of providing the best customer experience in all its dimensions. my second issue concerns the need for economies of scale in the industry. in many of the mena countries locally - incorporated insurance firms remain relatively small and are therefore unable to compete with large internationally active firms that have the benefits of scale. these benefits range from the ability to construct large diversified investment portfolios to efficiencies in it for claims handling and processing. over the long run, there is a need for locally - incorporated insurance firms to achieve greater scale economies if they are going to be able to compete on level terms with their international competitors. firms will only be able to achieve economies of scale if they become larger. inevitably, this means that there will need to be some industry consolidation. to - date, however, the shareholders of locally - incorporated firms have been reluctant to enter into mergers, perhaps because they fear that this will lead to a dilution of their control. however, if the industry ’ s growth opportunities are to be realized, shareholders will need to take a broader perspective and to recognize that future profit growth will require firms that are larger than those that bis central bankers ’ speeches currently exist. in this respect, i think it is

responsibility for regulating and supervising the banking sector rested with central banks. this reflected, of course, the pattern typically established around the world, with central banks taking on banking supervision as an extension of their responsibilities for maintaining orderly payment systems and monetary policy. in most cases, the regulatory mandates of central banks in the gcc also extended beyond banks, to cover certain types of related non - bank institutions ( such as money changers and sometimes investment firms ). however, insurance supervision was separately regulated by commerce ministries, whilst stock markets ( and their broking members ) were run as self - regulatory organizations. in bahrain, the above model changed in may 2002, when the government announced the transfer of regulation of the insurance sector and capital markets to the bahrain monetary agency – the organization which at the time undertook the functions of a central bank and banking supervisor. this process culminated in september last year, with the passage of new legislation and the replacement of the bma with a new organization – the central bank of bahrain. this was a far reaching reform, creating the first integrated regulator in the region, and bringing together under one roof both prudential and conduct of business regulation for the whole financial sector. in addition to its comprehensive regulatory responsibilities, the cbb very much remains of course a central bank, responsible for systemic stability ( including oversight of the payments system and monetary policy ), as well as for other central bank functions such as currency issue, reserves management and the provision of banking services to government. other gcc countries, of course, have also initiated a variety of institutional changes. sama, for instance, has assumed responsibility for regulating insurance, and a separate capital markets authority has also been established. both qatar and dubai, meanwhile, have established integrated regulators for the separate jurisdictions established inside their territories, although existing regulatory structures largely remain unchanged for the rest of their financial sectors. qatar, however, recently moved regulation of the doha stock market out of the exchange, into a separate qatar financial markets authority. in short, this region is seeing a period of significant regulatory reforms, reflecting a variety of different approaches. however, they all share a common desire to see regulatory standards increased. different countries, of course, need to develop the institutional structures that work best for them, depending on the state of development of their markets and institutional considerations. in our case, we strongly believe that the single regulator model has worked well for us, for a number of reasons. the key advantage for bahrain has been the economies of scale and