Fourthly, with globalisation and progressive liberalisation of insurance markets in Asia driving increased competition, the search for growth through new customer segments and improved margins from efficient operations will continue to intensify. In certain markets, players have shifted away from expensive face-to-face channels towards offering simple products through more cost efficient direct marketing channels. Such channels have also enabled insurers to make inroads into previously uninsured segments thereby going beyond just winning market share towards expanding the insurance marketplace. Finally, there is a renewed focus on financial inclusion to ensure that all segments of society benefit from economic growth. This includes ensuring that everyone is adequately protected from catastrophic events and other adverse shocks. Swiss Re has estimated the mortality protection gap in South and East Asia to be around USD32 trillion 8. Closing these gaps would require a clear vision to which all stakeholders, from the insurance industry to the Government and financial regulators, must aspire through stronger collaboration and coordinated initiatives. In this regard the Bank aims to increase the insurance and takaful penetration rate in Malaysia, defined as number of policies per population, to 75% by 2020 9 supported by other measures to promote the long-term sustainable growth and development of the industry as outlined in the Life Insurance and Family Takaful Framework (LIFE Framework). In the environment I have just described, insurers can no longer afford to rely solely on traditional business models and delivery channels.
However, from the point of view of financial stability we cannot completely disregard the possibility of capital outflow from the OFZ market if external or internal shocks were to take place. The Bank of Russia conducted a survey of foreign investors regarding their investment strategy in Russian sovereign bonds. The results of the survey show that a significant portion of investors buying OFZ admit that these may be sold prior to maturity. Such risks need to be taken into account and their impact on the economy reduced through clear and predictable policy. This is important because the situation on global markets remains fragile and volatile while uncertainty persists in a number of factors. Such factors include what format a British exit from the European Union will take, at this point still unclear; the possible negative consequences that will result from changing economic and trade policies in the United States; and the aggravation of political risks in Europe. The heightened risk of negative developments in the Chinese economy, given the high degree of debt load in the economy and increase in the number of corporate defaults over the last year, may also prove to be an important factor. However, seeing as total capital inflow is considered to be small, risks to financial stability associated with the possible outflow of this capital remain quite low. The excessive optimism currently experienced in global financial markets may also be a cause for concern.