For a small open economy like Switzerland, we have seen that there are considerable advantages in having a definition of price stability that anchors inflation expectations at a low level while at the same time allowing a certain degree of flexibility with regard to the accepted inflation rates. In our monetary policy strategy, we define price stability as a rise in consumer prices of less than 2% per year. Deflation – that is to say a sustained decrease in the price level – also breaches the objective of price stability. We thus do not have a point target in our definition of price stability, and we do not seek to achieve a specific value between 0% and 2%. Furthermore, the SNB focuses on the medium-term inflation outlook, which means that negative inflation or inflation rates in excess of 2% can also be temporarily permitted. In recent years, there has been intense debate in academic circles and also at central banks on how to best set inflation targets or define price stability. Some central banks have also adjusted their inflation targets. These adjustments have been primarily aimed at reducing potential constraints on the ability to take monetary policy action resulting from the low interest rate environment. Would adjusting the definition of price stability also make sense for the SNB? We are firmly convinced that our definition of price stability has proved its worth, even under the difficult circumstances of the past 15 years.
An insurance company like GE Life, which is located in the heart of a dynamic growth region, is well-positioned to capture the growing opportunities. Achieving sustainable long-term growth, however, is highly complex. Among the many segments in financial services, the life insurance industry has probably the longest time horizon. The industry takes on assets and liabilities that literally last a lifetime. Good actuarial data and analysis provide an important basis for risk pricing and management. But future trends and developments such as increasing longevity or medical breakthroughs are harder to predict. Hence, a sound framework on asset-liability management and a continual focus on risk management are critical. At the same time, markets are changing and innovating rapidly. Competition comes from many sources, while the needs of customers will continue to evolve. To keep up with the competition, intermediaries have to continue to invest in research and development, and provide value-adding products and services in risk management, underwriting, actuarial analysis, investment and financial advice. This is especially important in the context of Singapore’s maturing population who will need good retirement planning services in order to remain financially independent through their golden years. Another key implication of the long time horizon is the special relationship with the policyholder. In general, both the insurance company and the policyholders are entering into a long-term financial commitment. In any long-term relationship, the quality of trust is of utmost importance. This relationship of trust can only be sustained by good advisory and sales practices.