the start of the recession ( charts 5 and 6 ). 9 what might account for this flat lining in potential productivity? impact of financial crisis in an accounting sense, this stalling in productivity growth must be attributable to one of two factors. a slowing in the rate at which companies have added to the physical capital used by each member of their workforce. or a slowing in the pace of efficiency gains associated with the way in which companies combine capital and labour to produce output, known in the jargon as total factor productivity. in reality, it is unlikely that a slowing in the pace of capital accumulation contributed significantly to the weakness of productivity. this is largely a matter of arithmetic. annual business investment flows are small relative to the size of the capital stock. so even though business investment fell by around a quarter in the year following the collapse of lehman brothers, and remains 20 % below its pre - crisis level, it is unlikely to have had a significant impact on the stock of capital available per worker. 10 evidence from business surveys ( eg bcc, cbi ) and the bank ’ s agents suggest that capacity utilisation was above normal in both manufacturing and services sectors. qualitative survey balances can be adjusted to match the mean and variance of an estimated productivity gap from which inference about productivity may be drawn. see charts 3. 7 and 3. 8 in the august 2011 inflation report. potential productivity is constructed using the bcc surveys of capacity utilisation and productivity data from the ons for the manufacturing sector and private services excluding finance sector. the bcc survey asks firms whether they are operating at or below full capacity. since the survey measures are qualitative, they have been mean and variance adjusted over the period 1989 to 2006 to infer a measure of the gap between actual and potential productivity. the trends shown in charts 5 and 6 are chosen such that the shortfall between actual and potential productivity maps closely to the mean - and - variance - adjusted survey measures of spare capacity. the annual flow of business investment prior to the recession averaged around 7 % of the uk capital stock. a 20 % reduction in business investment for 5 years would result in the capital stock being only around 2 % lower ( assuming plausible assumptions for the rate of depreciation ). bis central bankers ’ speeches it is possible that this simple arithmetic underestimates the impact of the falls in investment spending, particularly if the falls were concentrated in highly - productive forms of investment. perhaps because

; in ensuring premiums, reserves and capital are prudent ; and in scanning the horizon for new risks and opportunities, that means we are minded to include both life and general insurance actuaries within the scope of our updated fit and proper regime for individuals in insurance. by including your profession in the new regime, we recognise the importance of your skills, the range of your contributions, and your personal propriety. later this year we will consult on a regime that includes the most senior actuaries – alongside ceos, chairmen and chief financial and risk officers – in our senior managers regime, making them directly accountable for how a firm is run, for their decisions, and for their actions. these senior persons will be expected to prove their fitness to regulators before they take up a role, and the onus will be on them to ensure risks are understood, measured and properly considered. right idea 3 : global standards for globally systemic insurers while much progress has been made on the home front, the focus of the global reform agenda since the crisis has been on putting a third idea into practice : common global standards for systemically important insurers. the goal of this work is to increase systemic resilience ; preventing spillovers from the failure of an insurer to the wider financial sector and the real economy. policymakers agree that traditional insurance activities need not of themselves be a source of systemic risk. indeed, recent events demonstrated three reasons why insurers are better able to withstand crises than other financial institutions. first, the underwriting cycle is generally not correlated with the business cycle ; second, the inherent resilience of business models that take a long - term view, and third, an insurer ’ s production cycle is inverted as they collect premiums today with a view to paying claims tomorrow. this model reduces liquidity risks and immunises insurers against risks of a run. insolvency takes time to manifest, and wind - down when it happens has historically been more orderly. given all that, you might ask : why the concern about systemic risk in insurance? the answer is simple : the financial crisis laid bare that the actions of some individual insurers – like aig – can have broad spillovers ; that some insurance markets – like the monolines – are systemic, and that the insurance sector plays a systemic role in diversifying the financial sector thereby reinforcing its resilience. aig was the extreme case of a systemic insurer.