In the same manner, interest rates will normally need to be raised in situations in which future inflation tends to get excessive as a consequence of a too high resource utilization. Consequently, when an inflation forecast shows that future inflation does not appear to be in line with the target, policy must be altered. In these situations there is a balancing problem. The question is how forceful the interest rate change should be. If it is dramatic, the adjustment in the rate of inflation to the established target may be faster, but the repercussions in the short term in the form of fluctuations in production and employment will probably be bigger also. Figure 1  P r ice Sta b ilizatio n : Alte r n a tive Pa th s  πt  2%  t+4  t+8  t  The reasoning can be made clear with a simple diagram (Figure 1). By choosing interest rate path 2 rather than path 1, the adjustment to the inflation target will be somewhat slower; however, the development in the economy will also be less spasmodic. BIS Review 56/1997  -3-  The fact that the Riksbank--when the price stability objective was introduced in 1993--chose to postpone its application for about 2 years (the decision that evaluation would only be made when the direct effects of the krona’s weakening had died away in 1995) can be said to have been a way of taking into consideration the above reasoning.
A growing middle class and rising affluence will underpin a steady increase in insurance penetration rates. Continued industrialisation, growing trade activities, and infrastructure development will mean greater demand for insurance solutions to mitigate a variety of risks. Over the next decade, insurance business in Asia is projected to grow at about 8% per annum. By 2020, Asia is likely to account for almost 40% of the global market. It is vital that insurers seeking to expand in Asia have a deep understanding of Asia’s risk landscape. Aggregate exposures have grown steadily in Asia, due to rapid urbanisation and economic growth over the last two decades. Asia’s strong record of development means that we have more to lose from unforeseen calamities. Take for example the spate of natural calamities in Asia in 2011. The three costliest events – the Tohoku earthquake and tsunami, Thai floods and New Zealand earthquake – caused a combined insured loss of almost $ billion. The scale of these losses was unexpected. Thailand had not even been viewed as a catastrophe risk zone, and had in fact been used to diversify against catastrophe risks. These events are a timely reminder to the industry to constantly stay ahead of the risk management curve. BIS central bankers’ speeches  1  3 + One strategy I understand that Allianz embraces a “3+One” strategy to achieve sustainable growth. In the spirit of this very happy occasion, allow me to adapt your framework to illustrate its relevance to Singapore’s insurance industry as a whole. One, Capacity.