business lines in a situation of financial stress. work has also been initiated to implement this in malaysia. financial institutions are expected to develop a menu of options for recovering from events of severe stress in order to restore business to a stable condition. these plans must be regularly updated to reflect changes in a firm ’ s business model and operational arrangements. at its most basic level, recovery plans are helping financial institutions to better understand their operational and financial interdependencies and how this can affect recovery options that are available to the institution. some institutions are finding through this process that their operations have become far too complex to support credible recovery strategies. these institutions are taking or considering steps to restructure parts of the business to achieve wider options for recovery. indeed, an important development emerging in the recent period has been the more explicit consideration of implications for recovery plans in key strategic decisions, such as decisions to hub operations at a particular location or service provider. as much as organisational resources are put into enhancements of business continuity management, it is important for businesses to always keep in mind the inherent limitations of bis central bankers ’ speeches business continuity plans and not be lulled into a false sense of confidence that these plans may provide. scenarios featured in these plans are often based on assumptions, which are a simplification of reality at best. such scenarios should always be rigorously challenged to account for changing conditions. business recovery or resumption actions should also contemplate a range of conditions to build agility within the organisation to execute required, but potentially untested, responses. firms should expect that they will rarely get to a point of precision in their scenario planning and bcm responses. this does not mean that bcm is necessarily reduced to an exercise in futility. a commitment to continuous improvements in bcm is almost certainly likely to prepare firms better for disasters and tail risk events even if those specific events were not exactly contemplated. this is because the organisation will be naturally better at coming together in a crisis, and would be able to leverage on some of the core elements of response plans that have already been developed and tested. the world today is encountering more extreme disasters such as epidemics and unpredictable weather - related calamities. in our own country, the worst flood disaster experienced in decades last year saw over 250 thousand people displaced with estimated costs of more than two billion ringgit to repair damaged infrastructure. this presents a sober reminder of the responsibility of all corporations to ensure that they are well prepared for

and remain resilient against calamities, not just for their own survival, but in the interest of employees and the community that depend on them. role and prospects of the insurance industry in advancing risk management the cost associated with negative tail - risk events will only escalate as business networks grow in complexity. the use of insurance continues to be an important way in which companies can reduce this cost by transferring risks to insurance providers. insurers are well - placed to assume such risks given their long standing history in risk analytics which enables them to effectively exploit the law of large numbers and benefit from risk pooling. among emerging economies, however, there is still a sizeable protection gap in spite of the increased frequency and severity of weather related disasters and other natural catastrophes. in 2014, insured losses in asia only covered about 10 percent of total losses incurred as a result of natural and man - made disasters. combined insurance premiums written from emerging markets accounted for only 18 percent of global premiums in 2014, against 82 percent recorded from the advanced economies. given the concentration of growth and development in emerging economies, going forward, the extent of underinsurance is a concern. in many of these economies, efforts are being aggressively pursued to increase awareness of the importance of insurance protection in helping one manage risks, and to develop an effective insurance market to meet these needs. the insurance industry in malaysia currently stands at crossroads of implementing important reforms being introduced by bank negara malaysia both in the general and life insurance sectors. the objective of the reforms is to further enhance the competitiveness of the industry, ensure its continued resilience, and encourage greater innovation in solutions offered for households and businesses to better manage risks. to this end, two aspects of the reforms are significant. the first is the progressive strengthening of prudential standards that aim to improve underwriting and risk assessment capabilities within insurance companies, while substantially strengthening incentives for insurers to differentiate themselves in the market. the second is the structural changes that are being introduced to reduce market distortions and drive efficiency improvements. beyond domestic borders, the bank also continues to pursue further liberalisation in the cross border provision of insurance in certain sectors, such as the marine, aviation and goods in international transit ( mat ) sector, both to enhance capacity and reduce costs for businesses. this is primarily being advanced under regional integration plans, focusing in particular on asean. taken together, the reforms are expected to result in wider product offerings and delivery channels, service quality