Spain, France and Italy have experienced the most rapid growth rates, but in Germany further declines or only moderate increases in prices have been reported. An evaluation of the risks to euro area financial stability stemming from the household sector depends on the balance sheet situation of households as this determines their resilience to adverse financial shocks. Both the households’ debt-to-financial assets ratio and the debt-to-liquid financial assets ratio have continued to grow, but more moderately compared with the rapid increase at the beginning of the current millennium. Although this implies a further deterioration of households’ financial position, the household sector’s liquid assets still exceed its debts. 5. Euro area financial system  5.1. Euro area financial markets  Let me now briefly turn to the euro area stock and corporate bond markets, both of which continued to develop dynamically until very recently. The Review points out that despite the favourable economic outlook, a risk of a slowdown in market dynamics cannot be excluded if risk-free interest rates continue to edge upwards and credit ratings and/or earnings growth surprise to the downside. On the positive side, structural developments in euro money markets, described in Box 6 of the Review, and the increased use of collateral in borrowing and lending transactions, discussed in Box 7, suggest an overall strengthening of the financial system’s resilience to a systemic shock.
Indeed, insurers have begun to redesign their products such that interest rate risks remain manageable; while offering guarantees that are valuable to policyholders at the same time. Financing Asia’s long-term growth 23. Next, financing Asia’s long-term growth. Insurers are one of the world’s largest institutional investors, managing almost $ trillion or a third of the world’s professionally managed assets9. Due to the nature of their liabilities, insurers are an ideal source of longterm funding to finance economic growth. They have the ability to invest in long-term and less liquid assets, such as infrastructure investments and clean energy. This role has never been more critical; at a time when banking regulatory reforms have crimped banks’ appetite and ability to play a long-term financing role. We are already seeing encouraging signs of insurers collaborating with banks to provide debt financing for infrastructure projects together. Allianz, Ageas and Swiss Re are just a few examples of insurance companies which have explored such moves. Zurich Insurance Group also recently made its single largest investment in green bonds, which fund projects that help mitigate climate change in local communities. Singapore – a key hub to capture Asian premiums and intermediate global-Asia investments 24. Singapore is now recognized as the leading insurance hub in Asia-Pacific. We are home to many top global insurance players, and an ecosystem comprising a strong brokers’ cluster, the largest captive community in Asia Pacific, a growing cluster of specialty players and the largest grouping of Lloyd’s syndicates outside of London.