The  tightening  of monetary policy in response to improved economic conditions may impact the growth of major advanced economies. The US Federal Reserve and the Bank of England have progressively raised interest rates; meanwhile, the European Central Bank has started phasing out its bond-buying programme (QE). The impact of monetary policy normalisation on financial markets should be closely monitored. The overall market sentiment is optimistic, but signs of possible repricing in financial markets are emerging. Market volatility has increased since the beginning of the year and price corrections were observed, most significantly in equity markets. Valuations remain stretched in equity, bond and certain real estate markets creating a high risk of asset repricing. Recent tensions in emerging markets, especially Turkey and Argentina, initiated some flight to safety mainly towards US investments. In the near future, the threat to global trade created by protectionist tensions, and growing political uncertainties, also in Europe following the developments in Italy and a significant probability of a hard Brexit may weigh negatively on the global environment. In addition, the European insurance sector has been facing an unprecedented and challenging low interest rate environment for the past four years. The downward trend in bond yields had a direct impact on the return on investments, especially for life insurers 2  who hold a substantial portion of their investments in bond securities.
Regarding the International Capital Standard, which aims to develop an international capital standard in order to be able to establish a comparable basis in terms of prudential requirements for all international groups, recent progress was made in Kuala Lumpur in November 2017 which should lead to, by the end of 2019, a version called “ICS 2.0” that will be used as a reference in international supervision Colleges, for a transitory period of five years. During this timeframe, each internationally active insurance group will have to ensure a compulsory and confidential five-year monitoring period based on the ICS, after which this standard is expected to become effective. Now, I will turn to IFRS17: it would be unreasonable to apply the new IFRS17 accounting framework right now. Given the obvious issue of timing, it is quite welcome that the IASB reopened the discussion and that the application of this standard has now been postponed by one year. This will primarily give us time to reach an agreement on identifying groups of loss-making contracts. We also want to bring the discussion on the 4  treatment of reinsurance contracts held to a satisfactory conclusion. At this point, there is too much room for interpretation in the standard, which could interfere with the comparability and consistent application across countries. In Europe, the current “hot topic” is the forthcoming Solvency 2 review. This review must include a full and objective assessment of the framework that has now been in place for three years.