and the need to adapt and revamp business strategies if companies wish to pursue growth opportunities in the region. in this context, let me outline some of these strategies and business practices that insurers need to address. first, the events surrounding the aig group have led to a tightening of reinsurance rates, a business aspect that is crucial in the smooth functioning of an insurance market. the current status of reinsurance capacity in our region needs to be scrutinized and companies must adapt new strategies based on their current assessment of the reinsurance markets. second, as insurance providers, companies receive funds from policyholders up front and must make important investment decisions to ensure that liquidity needs are met when called upon by policyholders. the current investment climate has been plagued with much uncertainty with many “ sure ” investments having disappeared from the financial landscape. who could have imagined that lehman brothers would no longer be an active member of the financial industry? companies therefore need to revamp their investment strategy to cope with these changes. third, we need to be reminded of the importance of having in place a good corporate governance regime. corporate governance is a key component in ensuring the overall soundness of all companies, including insurance firms. the valuation of shares as well as public disclosure and transparency are highly dependent on management ’ s approach to a sound framework of corporate governance. while it is sometimes tempting for those in the industry to view regulation as a burdensome imposition from outside, the financial crisis has been a reminder that markets need effective regulation if they are to operate properly. as a regulator, we at the cbb believe in creating a climate that encourages the development of a strong and sound insurance sector. in bahrain, we have welcomed several new companies over the last few years, a testimony to the belief that we offer an environment where companies can explore growth opportunities. these new entrants, many from world class international insurance players, have provided further evidence that there are ways to tackle the low level of insurance penetration in the region by offering products uniquely tailored to meet the local demand. several of these new entrants, have seen great advantages in setting up their regional headquarters in bahrain, having access to significant markets in the region. my remarks have highlighted key areas that insurance firms must focus on. i trust that this forum will provide you with the opportunity to have fruitful discussions over the next two days. additionally, i encourage all of you to look closely at your current business strategies and the need to possibly tailor them

rasheed mohammed al - maraj : luxembourg – a global financial services centre keynote address by he rasheed mohammed al - maraj, governor of the central bank of bahrain, at a seminar “ luxembourg – a global financial services centre ”, manama, 11 january 2010. * * * your excellencies, ladies and gentlemen : on behalf of the central bank of bahrain, it gives me great pleasure to welcome you to bahrain and to have this opportunity to discuss matters of common interest between luxembourg and bahrain. as i am sure you know, the economies of bahrain and luxembourg have many similarities. in both cases we act as a financial services hub for a wider economic region. in bahrain ’ s case, this region is the middle east and north africa, including the six member states of the gulf cooperation council. in consequence, like luxembourg, the combined assets of our financial industry represents several multiples of the size of our economy. traditionally, bahrain has concentrated on developing our banking industry, including the wholesale banks that provide project finance throughout the wider mena region. however, in recent years, in line with the vision 2030 plan, bahrain has sought to diversify its financial sector. we have seen a growing presence of insurance companies and fund managers. as of november 2009, there were 2, 610 authorised funds established in bahrain managing assets of over nine billion us dollars. while i realize that this is small in comparison with the size of luxembourg ’ s fund management industry, this is part of the financial sector that we are seeking to develop further and we expect it to grow rapidly in the coming years. the financial crisis has caused many financial centres to review their development strategies. bahrain is no exception to this trend, even though the crisis has had only a modest impact on our financial system. throughout the difficult period of 2008 and 2009, our financial markets continued to function normally and the government of bahrain did not consider it necessary to take some of the extraordinary measures, such as recapitalization of banks and providing blanket guarantees, that had been adopted in other parts of the world. although we needed to place two wholesale banks into administration in the course of 2009, these events did not have a spill - over effect to the wider financial system. in fact, the financial markets seem to have taken comfort from the prompt and effective action taken by the cbb in dealing with these two problem banks. in bahrain, as in the rest of the world, the impact of the financial crisis was felt first through a withdrawal