Mr. Gabriel Makhlouf:

Probably two things in particular are worth mentioning. The first is the regulatory framework. We now have a harmonised prudential regime for insurers and reinsurance. In the EU, people talk about it as Solvency II. It has much more comprehensive, risk-based and proportionate capital and governance requirements. It requires insurers to have robust risk management frameworks in place and to be much more proactive in identifying, measuring and managing risks. It also requires them to provide much more qualitative and quantitative reporting. That is the overall framework from Europe.

Domestically, we have made a number of changes. We have the domestic actuarial regime, which builds on what is required in Solvency II regarding actuaries and related governance. Corporate governance requirements for insurers have changed. We have also been given more powers partly to enable us to appoint third-party specialists when we do not have the expertise. The fitness and probity regime has been put in place to ensure that individuals in key and customer-facing positions are competent, capable and honest and there are other powers. All these powers have a significant difference combined with the fact that we have more than trebled the amount of resources we are putting into the insurance sector. We have had tools in place for a while to help us with our own risk assessment so that we direct those resources where we see the highest levels of risk.

Those regulatory and supervisory changes have made a significant difference. Last year, the IMF conducted an assessment of our financial system as a whole. It noted that we have come a long way in strengthening the system. I was there last week talking to senior IMF people about the system and they verbally told me the same thing they put in writing.

On the other hand, it is worth making a few points. We do not operate a zero-failure regime. We cannot prevent the failure of all insurers in all circumstances. The same applies to banks. Ultimately, the commercial risks are taken by the managers, the boards and, ideally, the shareholders of firms. Our job is to make sure that the system functions as a whole and that any risks to taxpayers are as whole minimised and ideally eliminated and that if a firm does fail commercially, as firms do, arrangements are put in place to ensure the resolution of the firm is done in a way that mitigates or minimises the impact on the community, economy and taxpayer.

All those changes about which I have just spoken do not stop us recognising that the financial system - insurance as well as the rest of it - is constantly changing so we need to be constantly ready to make sure that our regulations and toolkit for our supervision remain up to speed. Ms Donnery is leading a lot of work on transforming our supervisory work, which is a major focus for us.