The upgrade of CGO has been effected utilising CREST software -- deliberately, in order to align those two electronic settlement systems -- CGO for gilts, CREST for equities -- more closely. This was a considerable technical achievement, because the operating processes in the two markets are different -- equities settle on T+5, gilts on T+1 (and in some cases T+0); the equity market comprises a large number of relatively moderate-value deals, the gilt market a smaller number of much higher-value deals; hence delay in settlement in gilts is much more disruptive, and needs to be much less frequent, than in equities. Overcoming these differences has been a considerable challenge to the Bank team and I would like to pay tribute to their dedication and expertise and to their achievement in bringing the CGO upgrade to a successful and so far smooth launch just last week. I say this without immodesty because, though I was closely involved in overseeing the project, it was their technical proficiency that delivered the goods. 37. But this achievement has a wider significance. By utilising CREST software in CGO, we have now achieved for the market much of the benefit sought by those who favour a merger of the two systems. In particular, both utilise the same hardware, and the same software application; they operate on the same networks; and users can access both systems via a single terminal using a common gateway.
Possible market-turning events Previous soft phases of the insurance cycle have ended, sometime quite dramatically, with a major loss. Examples include Hurricane Andrew in the early 90s, Asbestos, Pollution and Health losses in the mid-90s and “9/11” in 2001. Whilst it is understandable that some in the industry talk of the need to have naïve capital and capacity cleared out of the market, restricting supply and supporting premium above the technical price level, there is a sense that, this time, things may be different. Many believe that further capital is “waiting in the wings” to invest in the sector in the event that prices rise. Nonetheless, it is sensible to plan on the basis that a significant, market-turning event might occur at some point. Taking this as the starting point, we think there is an opportunity for firms to think through what issues might then arise and to consider what steps can be taken now to plan for these events, not least because we know some firms will be very keen to respond to any improvements in market conditions which might arise after a large loss event. We are publishing today a consultation paper setting out our expectations of firms in planning for these types of extreme insurance loss events; focussing on some of the governance, risk management, capital management and reporting capabilities that we think firms need to consider.