mohd razif bin abd kadir : malaysiaa€™s life insurance industry speech by mr mohd razif bin abd kadir, deputy governor of the central bank of malaysia, at the official launch of axa affin life insurance berhad, kuala lumpur, 30 january 2007. * * * it is indeed an honour to be here this morning to witness the launching of axa affin life insurance berhad. the launch of axa affin life insurance berhad today marks an important development where two players from different financial industries, i. e. affin holding bhd and axa asia pacific holding ltd., forge a strategic alliance to attain synergy for mutual business advantage. i wish to congratulate both companies on this momentous event. ladies and gentlemen, the financial landscape had undergone tremendous transformation in the last decade. the life insurance industry continues to sustain strong performance amidst challenges in a competitive environment. the evolution in the financial landscape saw a shift in customers'preference, emergence of more complex products and increasing diversity in delivery channels. the growing acceptance by the insuring public for financial protection in the form of insurance coverage has gained prominence especially for investment linked products which currently commands a market share of more than 40 % of new business. this period also witnessed the growing importance of bancassurance as a channel for marketing life insurance products. the life business written via the bancassurance channel currently accounts for almost 50 % of the new business written in the life insurance sector. this potential is further supported by a survey conducted in 2004 which i believe remains relevant. the survey revealed that customers, despite the availability of banks'virtual network, prefer to visit branches to conduct their dealings ; there is a high level of confidence and trust generally placed by the public in banks ; and the strong preference among consumers for insurance products with a high savings content that enhances the complementary elements of insurance and banking products. this development provides significant competitive advantages for financial institutions and insurance companies which have partnered and adopted an integrated approach to market their financial products by leveraging significantly on the banking network. with close to 3200 bank branches located throughout the country, the banks'customer base constitutes a significant market potential. furthermore, the insurance and takaful penetration ratio is currently only at 44 % of the malaysian population. in this regard, there is huge potential that is left remaining untapped. despite the tremendous benefits that can be reaped from bancas

assistance. allow me to now share malaysia ’ s experience in the development of the sukuk market in our islamic finance marketplace. the islamic capital market in malaysia has been systematically developed to ensure accessibility whilst ensuring the protection of investors and efficiency in the intermediation process. the initiatives to develop the market are also strongly backed by the legal and shariah framework which is further supported by a robust financial infrastructure, including the settlement and bond information system that enables malaysia to provide a complete sukuk issuance and trading platform. since the first sukuk issuance in 1990 by a multinational corporation in malaysia, the sukuk outstanding in the malaysian marketplace is now us $ 158 billion. in 2002, the malaysian government issued its inaugural global sovereign sukuk, raising us $ 600 million, which became an international benchmark for the issuance of global sovereign sukuk. the marketplace has now been liberalised to allow for multilateral financial institutions, multinational and national corporations from other jurisdictions to issue both ringgit and nonringgit denominated sukuk in our sukuk market with increasing foreign investor participation in such issuances the sukuk market in malaysia has seen wide ranging innovative structures and a greater diversity in the type and maturity of the sukuk. a landmark issuance is the us $ 750 million exchangeable sukuk musyarakah in 2006 by khazanah, the government ’ s investment corporation for the purpose of selling a stake in telekom malaysia. it marked the first issuance of its kind, incorporating full convertibility features common to conventional equitylinked transactions. a further notable issuance was the pioneering retail exchange - traded sukuk to raise funds for a transportation project that allowed retail investors the opportunity to have direct access to the sukuk and thus a stake in a massive infrastructure development in the country, therefore broadening the range of low - risk investment products available to such investors. in terms of maturity, the ringgit sukuk market has seen issuances of maturities to 30 years which were well received by the financial market. regular sukuk issuances with different maturities by the malaysian government has also created a benchmark yield curve for market reference, of which is complimented by the establishment of a number of indices for non - ringgit and ringgit denominated sukuk that serve as benchmarks to track the performance of sukuk. these initiatives have progressively contributed towards creating a