An example of emergency liquidity assistance of this kind was the support provided to UBS in 2008. Prevention is better than cure The crisis showed, first, that it is not easy for central banks to identify all of the risks in advance. Second, it became clear that when central banks talk about specific risks, their warnings often go unheeded. The crisis also showed that policies limited to clearing up once a situation is out of control can be extremely costly. Moreover, there are contexts in which, for monetary policy reasons, the interest rate tool cannot be used for financial stability purposes. This situation has been only too familiar to us in Switzerland for some years now. Imbalances are developing on the mortgage and real estate markets, thereby posing a risk to financial stability. In principle, this risk could be combated by higher interest rates. However, the higher ranking monetary policy goal of price stability does not allow for any increase in interest rates in the foreseeable future. Thus monetary policy instruments, rhetoric and emergency assistance alone are not enough to make an effective contribution to financial stability. That is why new tools – the new macroprudential measures – have been developed internationally in accordance with the principle that prevention is better than cure. Their aim is to strengthen the resilience of the financial system as a whole and to prevent the build-up of such excesses on the asset and credit markets.
Disaster risk reduction and disaster management has thus become a focus of Governments to effectively reduce financial and economic losses. In an industry that is exposed to risks both natural and man-made, this Convention’s theme of “Today’s Risks, Tomorrow’s Claims” is highly relevant especially with regards to the challenges of insurance claims. There are three pertinent challenges that I can think of this morning. Let me briefly share my thoughts on these challenges with you. Firstly, the critical role of insurers in the various aspects of the claims management value chain, that is, claims intimidation, fraud detection and prevention, claim assessment and settlement, and complaint resolution are areas requiring close monitoring by insurers and,  BIS Review 53/2010  1  where necessary, timely intervention to detect and prevent leakages. Insurers have to assess their vulnerability and address the risk of fraud efficiently to reinforce a positive image of the industry to the public. Customers must be kept informed of the progress of their claims and be given clear explanation when a claim is rejected or not settled in full. Any delay or perceived delay in claims processing, particularly for claimants in urgent need of compensation, may be misconstrued as a deliberate attempt to delay claims settlement resulting in bad publicity and ill repute for the insurance industry. Each insurer’s claims management philosophy should therefore set out the broad principles for providing high quality service standards.