Pre-determined trigger events do not only have to be weather–related risks 5. Travel, power outage, cyber threat and business interruption risks caused by supply chains may also benefit from pre-determined payouts. There are thus ample opportunities for the industry to test or pilot such innovative offerings. On our end, the Bank is committed to provide a more enabling environment for the industry to explore, test and introduce innovations. For areas that may require regulatory flexibility, we plan to enhance the Regulatory Sandbox with pathways to accelerate time-to-live testing by simplifying the gatekeeping process for institutions with strong risk management capabilities. We expect to announce more details on this later in the year and hope to see greater participation by the industry to offer innovative protection solutions through the enhanced Regulatory Sandbox. Expanding the horizons for the future of insurance – augmenting protection with prevention Lastly, it is also imperative to augment the future of insurance to include risk prevention. Insurers and takaful operators have always played this role. For years, the industry has provided consumers with loss prevention advice for commercial lines. Ways and demands on risk prevention, however, are evolving. We expect to see a collective shift in the role of the industry from loss reimbursement to loss control and prevention in the upcoming years.
The highly fragmented banking system and relatively weak risk management systems within the domestic financial institutions which prevailed in Malaysia prior to the financial restructuring and reforms that were undertaken from 2001 would have rendered the implementation of Basel II extremely difficult, if not impossible to achieve without risking disruptions to the intermediation process. The financial reforms that were undertaken to strengthen the underpinnings of our banking system are therefore instrumental in facilitating the smooth transition to the adoption of Basel II in Malaysia without adverse market outcomes. In the more recent period, the Asian region as a whole has made significant strides towards strengthening market structures and institutional arrangements for financial stability. Two developments deserve mention, in view of their important contributions towards mitigating some of the concerns surrounding Basel II for emerging economies. First, in the decade following the Asian crisis, the emerging economies in Asia have extensively developed their bond and equity markets. Measured in terms of market capitalisation, East Asia's equity markets have more than trebled since 1997. The bond markets in the East Asian region have also seen significant growth during this period with significantly improved liquidity conditions in these markets. There is therefore now a more diversified structure in the financial system. Second, within Asia, the regional cooperative framework has been substantially strengthened to support financial sector development, surveillance, crisis management and capacity building.