ourselves was whether our rules to safeguard the prudent investment of the companies ’ technical provisions were not perhaps preventing, in the light of the evolution of the market and the regulatory framework, greater diversification of risk, which is the first prudential line of defence, not to mention preventing the achievement of profit levels sufficient to cover the companies ’ guaranteed obligations. we answered : possibly so ; and especially considering that the imminent solvency 2 regulatory framework will sweep away all the old mechanical rules and replace them with methods for assessing the risk of each investment. accordingly, already with the implementation of the destination italy decree, we created new asset classes to accommodate both direct investment in mini - bonds and commercial paper ( up to 3 per cent of the technical provisions ), and investment via securitization ( again, up to 3 per cent of the technical provisions ). in addition, we have raised the limit on exposure to a single fund within the class of “ alternative investments ” from 1 to 3 per cent for funds that invest in mini - bonds and securitized instruments. the potential for using these wider limits, in effect since last march, is equivalent to almost €30 billion. although the market for these instruments has already started to grow, interest on the part of insurance companies has so far been negligible. the competitiveness decree represents a sea change, allowing insurance companies to make direct loans ( but not to individuals or micro enterprises ), and to use them to cover technical provisions, together with the related securitizations. ivass participated in the preparatory technical work for these new regulations, conducted by the ministry for the economy and finance and the ministry for economic development. we worked in the best spirit of collaboration, always pursuing, as was our duty, our prudential aims. in this case as well, we felt that the proposed opening could work in the direction of sounder and more prudent management of insurance companies, providing them with a new “ asset class ” that would enable them more easily to reach the point on the efficient risk / return frontier most consistent with the obligations deriving from insurance liabilities. one aspect we insisted on was that the insurance company should be accompanied by a bank both in the initial phase of borrower selection and at the later stages. this point was included in the text of the decree. however, in the decree ’ s conversion into law the requirement that the bank and the insurance company should form a partnership, and in particular the provision that

can admit total investments of up to 5 per cent of the technical provisions. we shall see in the months ahead whether or not insurance companies show significant interest in this new business. from our occasional contacts to date, some interest has emerged in the funding of major infrastructure projects but little in lending to smes. given present cyclical conditions, insurance companies are certainly driven to seek higher yields than those prevailing in traditional investment classes, but they are well aware of the cost of equipping themselves to take on new and very risky tasks. for higher yield means higher risk ; and no one more than insurance companies has this maxim, frequently ignored by others, inscribed in their dna. one way of encouraging them could be to offer a government guarantee on the assets to be acquired. i have already said elsewhere that this would be a rational move on the part of the public sector, because it would remedy a potential “ market failure ” at a cost that will be both modest and deferred in time. 5 but insurers could also help in another way to ease the residual tensions in credit supply, especially to smes, namely simply sticking to their traditional business and increasing their coverage of the risks to which smes are typically exposed ( fire, theft, liability ). it is no secret that the better - insured businesses – size, location and sector of activity being equal – find it easier to access credit and at more favourable conditions. * * * the insurance and the banking communities can both contribute to the transformations of italy ’ s financial landscape that are now indispensable if this country is to return to growth. i “ finance for growth ”, op. cit. bis central bankers ’ speeches am aware that the issues i have dealt with are small ones. but i will not yield to the temptation to say “ it will take a lot more than that ”. let us all start with the small things within our ken. let us avoid the danger of confusing two different trades like the insurer ’ s and the banker ’ s, but at the same time let us not be held back by fear of the new. bis central bankers ’ speeches