Hong Kong may also be able to take advantage of the increased flow of funds for global investment which may be forthcoming from a greatly enlarged European capital market. Furthermore, to the extent that an offshore euro market develops, Hong Kong would be an obvious location for this in Asia. This reflects the existing large presence of European banks in Hong Kong and our role as a bridge between Europe and mainland China. Finally, Hong Kong is one of the world’s largest holders of foreign exchange reserves and the euro will provide interesting opportunities for diversification of our portfolio. Of course, the advent of the single currency also brings with it certain risks. The discipline imposed by the single currency will not always be comfortable, particularly when the business cycles diverge in different member countries. This could set up tensions which could at worst lead to a break-up of monetary union or at least undermine confidence in the euro. The current dispute between politicians and the European Central Bank over interest rate policy might be a foretaste of what is to come. A break-up of monetary union seems highly unlikely, but the potential for internal wrangling is clearly there and that could be disruptive to world financial markets. There must also be at least a possibility that closer integration of the EU could make it more self-contained and inward-looking. Intra-EU trade could increase, while that with the rest of the world and Hong Kong could diminish.
New products and delivery channels that enhance outreach ultimately contribute towards expansion of a larger industry, and pool of customers for all participants in the insurance sector as a whole. In other words, it is not a zero sum game. Everybody will gain. Insurance agents and financial advisers will continue to provide a valuable service as households and businesses move up the income ladder and require more personalised advice on product options. It is important that this evolution is accompanied by a strong focus on raising standards of professional competence. Increasing the proportion of full time agents from the current 40% in the life sector and 30% in the general sector will be a vital component of this agenda. Equally important is ensuring that remuneration structures are aligned with the  BIS central bankers’ speeches  3  interests of consumers. The implementation of the balanced scorecard is an important step in this direction and should not be further delayed or diluted. There is no question that the potential for growth in the insurance and takaful industry is significant, with estimates placing the life and medical insurance protection gap alone in Malaysia at between RM550,000 and RM723,000 per household. Closing this protection gap is ultimately the moral responsibility of the industry. Microinsurance and microtakaful should be further developed to improve access to the underserved segment of society.