models and prices as well as develop operational safeguards internally. an insurer wishing to expand into any new business area needs to demonstrate to the pra that new risk exposures are well understood and that the required capital for an altered risk profile has been fully considered. as stated previously, business model analysis forms an important part of the pra ’ s supervisory approach and a focus for its supervisory activity. insurers will need to deal with the pra in an open, co - operative and constructive manner to allow us to understand whether the business model is sustainable and to identify key vulnerabilities. this will ensure a more informed, focussed and proportionate supervisory approach. into the unknown over the past 25 years we have seen : the introduction of the euro ; break - up of the soviet union ; a shift from west to east ; the introduction of the world wide web to ordinary life ; and smart technology – so what will happen over the next 25 years? as an ex - forecaster i can tell you confidently that the only thing we can be certain of is that there will be changes that no one will predict. i did not think, some six years ago, when sat at the table of the monetary policy committee for my first meeting, that bank rate would continue to be 0. 5 % this far down the line. one can never be sure what tomorrow will bring and interest rates is a case in point. the low level of real interest rates today is, in large part, a product of spare capacity in the real economy and low levels of growth and productivity across the developed world. this presents a number of issues for insurers who rely on interest income from their assets as part of their basic business model, especially where these returns back contractual guarantees. without making any implied comment about monetary policy, just looking at today ’ s yield curve, it is not plausible for insurers to expect high nominal or real rates of return in the near future from low - risk assets. firms relying on high income streams from their assets may find themselves taking ever greater risks to their balance sheets. earlier on i mentioned the importance of governance in the work of the pra. it is one thing that can help generate robustness in the face of these uncertain developments. good governance should lie at the heart of every organisation. it is not just about the role of the board but includes management, controls, oversight and management information. good governance encourages better business practices and outcomes. of course, well

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