The same can and should be replicated in this region, with the presence of foreign global insurers driving this process. Major developments in Malaysia – Liberalisation of the life and general insurance sectors On the home front, two major developments are taking place; (i) the introduction of the Life Insurance and Family Takaful Framework and (ii) liberalisation of the Fire and Motor Tariffs. Both these initiatives will allow the industry greater operational flexibility to innovate, while ensuring that consumers’ interests remain adequately protected. Our goal remains unchanged – to ensure Malaysians have the opportunity to avail themselves of efficient and effective means to manage risks with insurance and takaful solutions that are appropriate for their circumstances. For the life insurance and family takaful sector, the focus remains to increase the penetration level, as measured by the number of policies in force per population, from 56 per cent currently to 75 per cent by 2020. This is envisaged in the Economic Transformation Programme and this target is certainly achievable. Product innovation remains key to achieve this target, particularly in the micro-insurance and microtakaful space which would expand the reach to the underserved segments of society. In the non-life or general insurance space, a more market-driven pricing structure will be introduced for motor and fire insurance. This will also pave the way for the development of products that can be more responsive to consumer and business needs in the two most dominant lines of business in the Malaysian general insurance sector.
And, as second-round effect, this could also impact the profitability and creditworthiness of financial institutions, and, if insolvency problems affect a significant proportion of firms, it could potentially trigger negative financial loops. Second, a high level of corporate debt, even if not leading to defaults, can still be a drag on investment in the years to come, lowering productivity and economic growth. The experience from the global financial crisis indeed shows that highly indebted firms are less dynamic in terms of capital investment and employment. And these two implications of high indebtedness can feed back into each other. The contraction of investment reduces future profitability and repayment capacity, and higher default rates make it more difficult to obtain additional financing, thus reducing investment. 1/2  BIS central bankers' speeches  These considerations can provide a rationale to use public resources to support firms with a high level of debt resulting from an exogenous shock, as has been the case with the pandemic, but which are nonetheless viable based on their medium-term perspectives in terms of profitability and productivity considerations. In this regard, the design of public support programmes to help viable firms improve their solvency position poses at least two fundamental challenges, related, first, to the selection of the firms targeted by the aid; and second, the design of a structure of incentives for those firms participating in these programmes.