jacqueline loh : re - thinking investment strategies for growth keynote address by ms jacqueline loh, deputy managing director of the monetary authority of singapore, at the asia investment management summit, 25 november 2013. * * * distinguished guests, ladies and gentlemen, a very good morning to all of you. 1. the global economic recovery remains uneven and fragile, five years after lehman ’ s collapse. while there have been some encouraging signs over the past year, with stronger jobs growth and the housing recovery in the us and the euro area economies stepping out of the recession zone, there continues to be heavy reliance on extraordinarily loose monetary policy and low interest rates for life support. 2. lean economic growth since the onset of the global financial crisis, beset by bouts of heightened volatility, present a challenging environment for investment managers. for the insurance industry, higher payouts following natural disasters pose additional difficulties. five of the ten costliest natural disasters, in terms of money rather than lives, occured in the past five years. 1 3. as a result of economic, financial and environmental systems coming under stress at the same time, insurance companies are now operating in extremely trying conditions. specifically, insurers ’ profitability is under pressure simultaneously from all 3 sources : a. firstly premium income, which is correlated to weak economic growth and excess capacity ; b. secondly investment income, amidst a low yield environment and higher market volatility ; and c. and thirdly, claims and expenses, given increasing claims for natural catastrophes. 4. in light of this unprecedented mix of challenges, the insurance industry is responding as follows : a. firstly, focusing more on improving underwriting profitability. against a backdrop of low yields, insurers can no longer rely on investment income to compensate for poor underwriting results. insurers now recognize the need to strengthen their underwriting capabilities, in order to improve underwriting profitability. following the spate of natural catastrophes in asia - pacific in 2011 for instance, many insurers have imposed more stringent underwriting and risk controls such as event limits and policy exclusions. steps have also been taken to close data and risk modelling gaps, which will enable more accurate measurement and in turn, better management of risk exposures. b. second, optimizing investment and product portfolios. for in - force businesses for which policy terms cannot be changed, insurers are primarily seeking to optimize their investment and hed

inclusion space, especially in the rural areas, and boosted economic growth. 28 there are other examples. robo - advisory services can allow investors greater access to customised, low - cost financial advice. other initiatives like open banking can provide potential benefits to a broad range of consumers by allowing for the easy portability of data and payment instructions. the use of distributed ledger technology, or blockchain, may replace traditional central party systems or intermediaries by creating alternative trusted platforms. such blockchain - based immutable transaction and account records may help to facilitate cross - border transactions, by cutting costs and settlement time without compromising on security and certainty. 29 there is no contradiction between regulation for safety and prudence vis - a - vis regulations that are open to, or supportive of, good financial innovations. these may be new business models or use of a technology that promote competition, improve customer experiences or simply a more efficient or pleasant delivery of services. so far from adopting a luddite instinct, many financial regulators have in fact set up dedicated teams to both support and to monitor new fintech developments. but as with any innovation in any era, fintechs can also bring about new risks. in this regard, international organisations such as the international monetary fund, fsb, iosco and the basel committee have all produced several useful public reports on the potential risks. 31 as examples of new risk typologies, there may be increased vulnerabilities to anti - money laundering and efforts to counter the financing of terrorism, given the anonymity of digital currencies. cyber - security is another area as fintechs vary in size and risk management capabilities. there can also be an increase in macro - financial risks from contagion, procyclicality, or excess volatility given the increased speed of financial transactions, and new networks of relationships. open banking and the ease of moving funds can also lead to potentially destabilising movements of money, posing liquidity risks. 32 i welcome more research and studies to guide such developments. it is probably too early to determine whether and how fintechs or bigtechs may change the behaviour of incumbent financial institutions. it is also not unreasonable to expect that traditional business lines between financial services, general commerce or telecoms will increasingly be blurred – and activities may concentrate in the biggest institutions with superior competitive advantages including in the areas of talent, customer base, and customer data. the faangs and bats