these initiatives for the takaful industry to achieve sustainable success and unleash the potential gains of the islamic finance in malaysia and abroad. allow me to share some significant developments that may shape the future direction of the takaful industry moving forward. firstly, as the prudential framework evolves towards a predominantly principle - based and riskbased regulatory approach, there will be a greater emphasis on risk management, corporate governance and transparency so as to maintain investor confidence and public trust. commensurate with the diversity and complexity of takaful operational framework, products and services, the continuous upgrading of risk management practices, with improvements in governance standards and enhancements of information management systems will be critical. under this environment, it is envisaged that takaful operators, individually or collectively, will play a bigger role in enhancing risk management practices, developing market conduct standards, fostering fair market practices and improving financial literacy among consumers. this will be even more important with the implementation of the risk - based regulatory regime, whereby 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 a takaful operator, will rest increasingly with the board of directors and senior management of the takaful operators. moving forward, a differentiated regulatory approach will increasingly be adopted, where companies that exhibit strong corporate governance and risk management practices will be given greater regulatory flexibility and may enjoy greater capital savings. secondly, it is vital to have in place an efficient and cost - effective delivery channel for the takaful business, strategically aligned to fulfil the participants'reasonable expectation. bancatakaful strikes as an attractive value proposition that enables takaful operators to tap into banking institutions'large customer base and attract the existing clientele of the latter to have access to integrated financial service offerings in the most cost effective manner. strategic alliance in the bancatakaful arrangement has indeed shown a significant improvement in the takaful contributions over the past few years. this is evident with the significant three - fold increase in contributions of the product marketed through bancatakaful in 2005 which accounted for 20. 4 % of total contributions. bancatakaful has contributed considerably to the increased penetration in the family takaful business, especially for single contribution takaful plans. we envisage significant inroads in the penetration rate of bancatakaful in future years in line with the positive trend shown by the conventional counterparts, where

the bancassurance captured 45. 3 % of the new life insurance business premiums generated in 2005. through efficient cost structures of bancatakaful and with the entry of joint - venture takaful operators involving banks and savings institution with extensive nationwide branch network, the takaful industry should maximize the potential of this alternative distribution channel. finally, on the global front, islamic finance has made significant inroads and has achieved growing global recognition. another significant milestone in the progress of islamic banking and finance as recently announced by bank negara malaysia is the initiative to enhance the position of malaysia as an international islamic financial centre ( mifc ). with the vibrant domestic islamic financial industry that has become an integral component of the financial system, malaysia is now well positioned to be an international centre of origination and issuance of islamic financial instruments, fund and wealth management, islamic financial activities in international currencies and takaful and retakaful businesses. as at year 2005, the total gross contributions from takaful business outside malaysia recorded an insignificant proportion of the total contributions of the industry. the relatively low participation of takaful operators in international business, is however set to change with the recently announced mifc initiatives, to allow qualified local and foreign financial institutions to conduct the full range of islamic banking and takaful businesses in foreign currencies. it was also announced in the recent budget that attractive tax packages in terms of 10 year tax holiday are given to all takaful operators on their international currencies takaful business. in addition, mifc accords greater operational flexibility for the islamic financial institutions to conduct islamic financial services in foreign currencies from anywhere in malaysia. to ensure effective delivery system under mifc initiatives, the mifc executive committee, with bank negara malaysia as secretariat, has been set up to provide directions and drive implementation of policies and strategies to foster effectiveness and efficiency of the mifc. well capitalised and reputable financial institutions that possess sound track record are encouraged to set up international takaful operation in malaysia to conduct out - out takaful and retakaful businesses. the malaysian takaful operators should seize the opportunity to venture into out - out takaful business establishing an international currency business unit to offer takaful business in international currencies. ladies and gentlemen, in tandem with the rapid changes and expansion of the islamic financial sector, it is vital for us to have a strong, continuous support in talent management and