significant participation in financial conglomerates, and the fiscal contingency embedded in life annuities and disability and survival insurance contracts. despite the progress made by the cmf, and the evolution of the industry in terms of risk management and corporate governance enhancements, moving towards a robust legal framework of risk based supervision in the insurance industry is essential for the preservation of financial stability. let me conclude. a deep capital market remains critical to economic development and to ease macroeconomic adjustment in the face of global shocks. the shallowing of our domestic capital market over the past few years has deteriorated the access of firms and households to long term finance. this puts into focus the need to reestablish long term savings as well as ease the functioning of our markets. the recent proposed legal changes included in the resilience bill, as well as the broad support that the proposed pension reform should promote long term savings are welcomed, and should support financial stability. thank you. 3 / 3 bis - central bankers'speeches

. perhaps the most interesting application of a liability - side focus on capital regulation is the case of insurance companies. given the ongoing discussions of capital standards in the international association of insurance supervisors, the issue is also a timely one. several relevant points can be derived from attention to the liability side of insurance company balance sheets. first, as shown in my earlier example of how liability structure affects capital needs, the largest segment of a traditional insurance company ’ s liabilities is composed of contingent claims based on the occurrence of specified events, such as the death of an insured person or destruction of insured property. these claims cannot be accelerated at the discretion of the holders of the contracts so, unlike deposits in a bank, these liabilities cannot run in any meaningful sense. unless customers decide to sever their relationship with the company, in which case the contingent liability will be reduced or eliminated, they will continue to provide funding to the firm. life insurance, in particular, has an unusually predictable liability pattern, well - refined by actuaries over the years. thus there is a relative absence of liquidity risk as compared with other kinds of intermediaries. property and casualty insurance is somewhat more volatile but that volatility is not correlated with the broader economy. so, while higher capital levels may be needed for microprudential purposes, the traditional property - casualty insurance model does not appear to raise significant funding, fire sale, or other macroprudential concerns. these traditional insurance liabilities argue for lower capital requirements than might be required for a hypothetical bank holding a similar portfolio of assets. and, as noted earlier, in some respects they also argue for a gone - concern approach to capital regulation. however, a second observation is that the liability side of the balance sheets of many large insurance companies look quite different from this traditional picture. many life insurers, for example, now offer wealth and retirement products with account values that can be withdrawn at the discretion of the policyholder, sometimes with little or no surrender penalty. although these products are generally considered medium to long - term liabilities, the option to surrender or withdraw funds creates the potential for increased claims that could strain the liquidity of the firm. recent history suggests that the surrender rates of fixed annuities are directly related to the path of interest rate rises. in the middle part of the last decade, as interest rates rose in the united states, the surrender rate for these products increased by about 75 percent in just a few years, before