by industry on numerous occasions. it should not come as a surprise however that there are fundamental principles of the regime that we would seek to maintain. as i ’ ve said before, the principles of solvency ii – a whole balance sheet, market consistent approach to regulatory solvency, focus on good governance and risk management – remain valid. looking forward : emerging supervisory priorities beyond solvency ii, the insurance supervision directorate has a number of supervisory priorities that we are pursuing through firm supervisory programmes and cross - firm reviews. all speeches are available online at www. bankofengland. co. uk / news / speeches some of these are on a slower track due to our work with insurers in response to covid - 19. others have been brought into sharp relief by the crisis. i ’ ll focus on three. uk life insurers have been incentivised to invest in long - term, illiquid assets with higher yields for some time, given the low interest rate environment. as a result exposure to credit and other risks ( e. g. property ) has been increasing. this is further exacerbated by covid - 19 as wider economic disruption has impacted the underlying creditworthiness of some of these assets. the pra has published several – one might say many - supervisory statements setting out how we expect firms to manage risks arising from such investment strategies. we ’ ve clarified how we expect firms to apply and model the matching adjustment4 ; taken a deep dive into liquidity risk5 ; and provided additional guidance on the practical implementation of the prudent person principle 6, which is the part of solvency ii that deals with qualitative aspects of investment risk management. we will be publishing some further, important clarifications on the prudent person principle at the end of this month. we expect firms to demonstrate that they have strong governance and internal investment limits that are effectively implemented ; this remains one of our top priorities for supervision of the life insurance sector. operational resilience – a strategic priority for the pra and the bank as a whole - has been tested in a way few business continuity plans could forsee, as covid - 19 has affected all our operations, processes and people. the insurance industry – all the people who work in it - responded extremely well to the operational challenges that have arisen from the covid - 19 pandemic. there are, of course, still challenges for all of us as we move from immediate

contributed to the u. s. trade deficit are not unrelated and may be part of a broader evolution of the global economy. the same types of liberalization and innovation that have improved financial intermediation within the united states, for example, have likely been instrumental in reducing home bias and increasing intermediation among countries. improvements in financial markets, both at home and abroad, may have amplified the effects on the u. s. current account of other developments i have discussed, including the u. s. productivity surge and the perceived weakening of foreign investment opportunities. it is even possible that the expansion of the u. s. budget deficit would have been smaller had policymakers perceived global financial markets to be less willing to finance the gap. the view that the current account deficit stems from economic developments that are varied and yet intertwined has important implications for how the deficit will be corrected. such a view suggests to me, first, that government policies such as budget - cutting or encouragement of private saving are unlikely, by themselves, to correct the current account deficit, much as they might be desirable for other reasons. such policies probably do not address all or even most of the root causes of the current account deficit. however, the fact that i have deemphasized government policy as the source of the adjustment process does not mean that the public sector has no role to play. reducing our budget deficit can ease the adjustment process by releasing resources that can be channeled into higher net exports, so that a reduced trade deficit does not require a curtailment of investment. the public sector in several nations has an important role in creating flexible markets for products, labor and financial assets. appropriate macroeconomic and structural policies in many economies can contribute to the privatesector adjustment process by fostering an environment of innovation, increased productivity and morerapid growth of domestic demand. recognizing the role for pubic policy, the group of seven industrial nations recently stated that vigorous action is needed to address global imbalances and foster growth. the primary impetus toward adjustment of the u. s. current account deficit, when it occurs, likely will come from private markets. here, however, the multiplicity of factors underlying the large u. s. current account deficit raises questions about how that adjustment will come about. some of the developments that may have supported the expansion of the u. s. current account deficit might reverse themselves - foreign domestic demand could recover, u. s. private saving rates could rise. and some of the