area. in singapore, we established the corporate governance code for listed companies last year. mas has tightened corporate governance standards for local banks. we recently required auditor rotation for local banks, a policy which we had been considering for some time, even before the latest wave of accounting scandals. for insurance companies, we are currently working on a draft corporate governance framework. mas is consulting the industry and will issue guidelines for internal governance for local boards of directors, as well as guidelines for the roles and responsibilities of principal officers of insurance companies. the guidelines for internal governance will deal with the main responsibilities for the board, stress the importance of transparent and performance - linked compensation ; emphasise the need for the integrity of financial information ; encourage fair dealings with the members of the public who are policy - holders and urge insurers to engage in regular communications with policy - holders. life insurance companies are entrusted with the management of long term funds. we are considering more rigorous corporate governance requirements for life insurers. we intend to formally introduce and enforce the corporate governance framework for the insurance industry later this year. imposing risk - based capital requirements in a world of new and increased risks, appropriate levels of capitalization are necessary. insurers face mounting complexities, given the increased volatility of asset risks and the diversity of liability risks. in singapore, as in many other countries, the existing statutory framework of solvency and capital adequacy for insurers is essentially a " one - size - fits - all " approach. this is clearly no longer appropriate, since different insurers have acquired different levels of exposures to financial risks and developed different underwriting specialties. in banking, a risk - based capital approach is well - established. there are clear guidelines from the bank for international settlements, and a new standard is undergoing extensive worldwide consultation. for the insurance industry, the same level of regulatory consensus does not as yet exist. mas has formed two work groups comprising industry practitioners, representatives of professional associations and regulators to develop risk - based capital models for life and non - life insurance. besides refining the treatment of liability risk, we will also look at capital charges for asset risks. this will help to level the playing field between banks and insurance companies, and minimise opportunities for capital arbitrage. the new capital requirements should also provide an early indicator of financial weaknesses, and thus facilitate progressive intervention by regulators. these risk - based capital requirements will be introduced by end - 2003. raising professional standards in

major insurers such as hih and independent, left businesses without essential insurance cover, and critical services without professional indemnity coverage. economic activity in these sectors might have ground to a halt, had the government not stepped in. but by stepping in, the governments created a new source of moral hazard. these issues have been extensively debated. the imf has concluded that the insurance industry, while not systemically critical, has taken up a definite systemic relevance. we need to understand better the nature of insurance companies'financial activities and their possible impact on global financial stability. in singapore, the supervisors of banks, insurance companies and securities houses are housed under one roof in mas. this has given us a head - start in dealing with current industry trends, with financial product boundaries blurring and insurance companies crossing over into banking and capital market territory. the pressure is on to bring integrated supervision to an even deeper level. singapore ’ s response in today's new risk landscape, mas aims to develop sound and efficient markets where risk can be effectively spread and mitigated. we need to make sure that best practices prevail in the management as well as regulation of insurance companies. strong players will make for a resilient industry. two years ago, singapore opened up completely the direct life and general insurance market. the earlier closed - door policy had insulated both local and foreign incumbents from competition and engendered complacency. creating an open and competitive environment was the first step to raising standards and strengthening resilience. since we opened up the industry, insurers in singapore have taken various measures to enhance their competitiveness. they have sharpened their business focus, moved into higher - value added and higher - growth areas and improved professional standards. this will stand our insurers in good stead to meet new challenges and opportunities. meeting new challenges and opportunities entering new growth areas globalisation of markets, advances in technology, changing demographics and socio - economic patterns are some trends that will result in new or changing needs for insurance protection and financial planning. insurers should hone their skills in these new areas and take advantage of emerging opportunities. one important opportunity is in health insurance, especially financing the health care needs of the aged. this is a challenge that is facing governments around the world. it is no different in singapore where the population is aging rapidly. health insurance can play a greater role in financing old age medical care than it now does. mas plans to introduce in 2003