, policymakers are faced with conflicting challenges as they seek to maximise economic growth on the one hand ; while having to pursue fiscal consolidation and financial sector reform on the other. meanwhile, emerging economies will grapple with tighter financial conditions and by implication, slowing growth when unconventional monetary policies are unwound. the outlook is highly uncertain as the normal cyclical recovery template cannot be applied to structural deleveraging episodes such as the one we are currently in. although bond yields are expected to rise from their current low levels, it is likely that insurers will have to settle for much lower returns from fixed income investing in the years ahead than that achieved in the pre - crisis period. over the next 20 years, the slowing demographic outlook for the world will also exert pressure on economic growth and lower the expected returns for most asset classes. shortage of long duration assets 9. next, a shortage of long duration assets. asia has often been singled out as the bright spot in the global insurance industry, as rising incomes and lower than average allianz global investors estimates. oecd global insurance statistics. bis central bankers ’ speeches insurance penetration in many markets offer rosy opportunities for growth. however, in terms of seeking investment returns, asian insurers are operating within similar market trends as their global counterparts. to illustrate, long - term government bond yields in the us and euro area have declined an average of 200 to 300 bps compared to the 10 - year average prevailing before the global financial crisis. in asia, long - term government bond yields are, on average, 50 to 300bps lower than pre - crisis levels. asian insurers also have to face increasing costs of capital4, compounding the pressure to generate higher returns. 10. addressing the duration mismatch between assets and liabilities has been a persistent challenge for insurers in asia, due to a shortage of long - dated instruments as well as restrictions on investments in some jurisdictions. a number of governments in asia, including korea, taiwan, china and singapore, have responded by issuing long - dated bonds ; and easing restrictions on specific assets classes that insurers can hold. notwithstanding this, the supply of high quality government and corporate bonds remains limited relative to the strong demand from a wide spectrum of investors for these “ safe haven ” assets, such that insurers can be crowded out. regulatory reforms 11. finally, let me touch on the oncoming regulatory reforms, such as solvency ii, which will also

’ s retirement funding gap 21. firstly, financing asia ’ s retirement funding gap. asia is experiencing declining fertility rates, increasing life expectancy, and a rapidly aging population. between 2011 and 2030, asia ’ s share of population aged 60 and above will increase from 40 % to almost 50 %, compared to the global average of 20 % 7. at the same time, public retirement and pension systems remain inadequate, and the retirement funding gap is estimated to be up to 13 years of retirement savings8. insurers can play a pivotal role in financing individuals ’ retirement security through pension, annuity and saving products, complementing public pensions. source : munich re study on asia - pacific insurance market 2020 ( march 2012 ). “ financing social protection in developing asia : now and in the future ”, nus, 27 may 2013. 2013 manulife investor sentiment survey. bis central bankers ’ speeches 22. insurers in asia stand to benefit from robust premium growth on the one hand ; but will also be subject to greater volatility from fluctuations in the economic and financial market cycles on the other. the low - interest rate environment is likely to magnify the present value of future increases in longevity, which will in turn, affect the solvency position of annuity providers and pension funds. while this can have unintended consequences on insurers ’ role in supporting retirement adequacy, it can provide the impetus for product innovation and alignment with the new investment and regulatory climate. indeed, insurers have begun to redesign their products such that interest rate risks remain manageable ; while offering guarantees that are valuable to policyholders at the same time. financing asia ’ s long - term growth 23. next, financing asia ’ s long - term growth. insurers are one of the world ’ s largest institutional investors, managing almost $ 25 trillion or a third of the world ’ s professionally managed assets9. due to the nature of their liabilities, insurers are an ideal source of longterm funding to finance economic growth. they have the ability to invest in long - term and less liquid assets, such as infrastructure investments and clean energy. this role has never been more critical ; at a time when banking regulatory reforms have crimped banks ’ appetite and ability to play a long - term financing role. we are already seeing encouraging signs of insurers collaborating with banks to provide debt financing for infrastructure projects together. allianz, ageas