Muhammad bin Ibrahim: Today’s risks, tomorrow’s claims Keynote address by Mr Muhammad bin Ibrahim, Assistant Governor of the Central Bank of Malaysia, at the International Claims Convention 2010 “Today’s risks, tomorrow’s claims”, Kuala Lumpur, 19 April 2010. *  *  *  First of all, I congratulate the Malaysian Insurance Institute, the Australasian Institute of Chartered Loss Adjusters and the Association of Malaysian Loss Adjusters for their excellent efforts in jointly organizing this convention, themed “Today’s Risks, Tomorrow’s Claims”. I understand that this is the leading insurance claims event with an exciting programme for insurers, loss adjusters, risk managers, claims industry specialists, suppliers and industry associations. The Convention provides a platform for the relevant parties involved in insurance claims to examine and deliberate on the growing challenges in insurance claims with a view to formulate anti-fraud best practices in the insurance industry. The global insurance industry as a whole remained resilient despite the deepening of the global financial crisis in 2009 that is expected to potentially lead to more insurance fraud cases. Whilst the decline in the financial markets has put significant pressure on insurers’ investment portfolios, the aggregate financial position of insurers remained strong to weather the crisis. The financial sector in Malaysia, following a decade of financial reforms that include strengthening the regulatory and supervisory framework, and building the domestic financial infrastructure, is now bolstered by high capitalization levels, sound asset quality and sustained profitability. As a result, it was well-positioned to weather the deterioration of the external environment.
In short, some hard work has been done in the euro area to unwind imbalances and to reinforce governance. But there is still a lot more hard work to do. Maintaining the current momentum of reform is essential for putting the euro area on the path back to stability. Fragmentation in monetary policy transmission Let me now turn to the measures being taken by the ECB. 2  BIS central bankers’ speeches  The confidence crisis and the process of adjustment across the euro area has weighed on short-term growth and dampened inflationary pressures. To maintain price stability, the ECB has lowered its interest rates to historically low levels. But before August this year, our low interest rates were not reaching companies and households evenly across the euro area. In some countries, interest rate reductions were being fully passed on. In others, lending rates barely declined. And in a few countries, they had actually risen. This divergence happened because banks in some countries had found it increasingly expensive to obtain funding from market sources. They therefore could not pass on the lower interest rates to their customers. This meant that monetary policy was unable to support the real economy in these countries. Smaller companies were affected the most, as was clear from our surveys of SMEs. And as companies in the euro area are very dependent on bank loans for financing, some economies were being forced into a damaging cycle. Economic activity was weakening. Public finances were deteriorating.