of the fed ’ s balance sheet may evolve. given the uncertainties i have described, i have chosen to show three different scenarios, drawn from the most recent annual report released by the federal reserve bank of new york, which was published last month. 13 these scenarios highlight the degree to which the longer - run size of the fed ’ s domestic securities portfolio — also known as the system open market account, or soma, which accounts for the vast majority of the fed ’ s assets — will be affected by choices about the future level of reserve balances and the evolution of nonreserve liabilities. the assumptions underlying the scenarios are based on the distribution of responses from the surveys i described earlier, as those surveys also asked respondents to forecast the likely longer - run levels of several liabilities on the fed ’ s balance sheet other than reserves. the “ median ” scenario, represented by the red ( middle ) line in the figure, is based on the 50th percentile of survey responses, while the “ larger ” and the “ smaller ” scenarios, denoted by the gold dashed ( top ) and blue dotted ( bottom ) lines, are based on the 75th and 25th percentiles, respectively. the figure illustrates that the fed ’ s securities holdings are projected to decline about $ 400 billion this year and another $ 460 billion next year as treasury and agency securities continue to roll off gradually from the fed ’ s portfolio. the kink in each curve captures what the fomc has referred to as the point of “ normalization ” of the size of the fed ’ s balance sheet — that is, the point at which the balance sheet will begin to expand again to support the underlying growth in liabilities items such as federal reserve notes in circulation. all else being equal, greater longer - run demand for currency, reserve balances, or other liabilities implies an earlier timing of balance sheet normalization and a higher longer - run size of the balance sheet, as illustrated by the top line. and the converse — smaller demand for these liabilities and a later timing of normalization, illustrated by the bottom line — is also possible. in the three scenarios shown, the size of the fed ’ s securities portfolio normalizes sometime between 2020 and 2022. that is quite a range of time, so as the balance sheet normalization program continues, the fed will be closely monitoring developments for clues about banks ’ underlying demand for reserves. what will the fed be monitoring as reserves are drained and the balance sheet

but such expectations may be altered in the near - term. the financial crisis is a clear reminder for insurers to return to basics and focus on its core function of sound business underwriting. the increasing intensity of climate change has heightened the vulnerability of the world at large to natural disasters and extreme weather conditions. tsunamis, volcanic ash and earthquakes, not previously known to strike in generally thought “ safe ” zones have actually occurred. similarly, earthquakes and hurricanes have become more intense causing multibillion dollar losses to the affected economies. disaster risk reduction and disaster management has thus become a focus of governments to effectively reduce financial and economic losses. in an industry that is exposed to risks both natural and man - made, this convention ’ s theme of “ today ’ s risks, tomorrow ’ s claims ” is highly relevant especially with regards to the challenges of insurance claims. there are three pertinent challenges that i can think of this morning. let me briefly share my thoughts on these challenges with you. firstly, the critical role of insurers in the various aspects of the claims management value chain, that is, claims intimidation, fraud detection and prevention, claim assessment and settlement, and complaint resolution are areas requiring close monitoring by insurers and, where necessary, timely intervention to detect and prevent leakages. insurers have to assess their vulnerability and address the risk of fraud efficiently to reinforce a positive image of the industry to the public. customers must be kept informed of the progress of their claims and be given clear explanation when a claim is rejected or not settled in full. any delay or perceived delay in claims processing, particularly for claimants in urgent need of compensation, may be misconstrued as a deliberate attempt to delay claims settlement resulting in bad publicity and ill repute for the insurance industry. each insurer ’ s claims management philosophy should therefore set out the broad principles for providing high quality service standards. this corporate claims philosophy should be documented and communicated to all staff for adoption as a common corporate value that is perceptible to the public. secondly, the challenge of detecting and preventing insurance fraud, which is a crime against all segments of society and not a victimless crime as perceived by many. due to the long supply chain and participation of numerous stakeholders, especially in the general sector, insurance fraud is easily committed and is a major source of leakage for the industry, thereby hiking up claims costs. insurance fraudsters are also adept at hiding behind the protective shield of jurisdictional boundaries