Description: This paper evaluates the current practice of operational risk management in the insurance sector. Operational risk is nothing new in insurance, but, because of regulatory requirements, companies have initiated computation of risk capital for their operational losses. The current effort to manage operational risk is not a naturally evolving phenomenon, and operational risk, in the Basel Committee on Banking Supervision’s Basel II definition, is unlikely to be a significant cause of insurers’ failure. In addition, the current Basel II definition of operational risk is not suitable for the insurance sector. Consequently, the invention of models and tools based on the definition is incomplete and illusionary. My findings are based on the analysis of dozens of interviews with insurance industry professionals. I demonstrate the way operational risk is quantified in practice, show that the result obtained from this computation is of littl e use in managerial decision making and propose a set of policy recommendations illustrating the characteristics of operational risk in insurance. This study can be used as a platform for launching dialogues to initiate fresh thinking about operational risk in insurance beyond the current artificial and narrow boundaries.

Description: Increased attention was paid to regulatory capital with the global financial crisis in 2008. Whilst companies may not have the incentives to retain a large amount of capital in the absence of regulatory capital requirements, overcapitalized entities can have drawback such as its impact on competitiveness. There are other weaknesses in the regulatory capital model such as its limitation in facilitating risk-based decisions as regulatory capital does not necessarily reflect the economic reality and risks an entity faces. Nonetheless, there are ways for regulators and/or companies to handle the weaknesses in the regulatory capital model. For instance, granularity can be introduced in determining regulatory capital. Economic capital can be used to encourage entities to implement risk management controls and facilitate risk-based business decisions (e.g., risk-adjusted performance assessment and risk-based capital allocation). Ultimately, hav ing effective risk management and risk-based capital determination are ways to prevent company failures and bankruptcies.

Description: The 2024 Dangerous Risks survey shows respondents react to recent increases in "old favorite" risks as technology evolves and the environment moves away from the pandemic.

Description: This article addresses the key capital and risk management issues immediately confronting the industry.

Description: This article provides some insights into risk appetite and how it relates to ERM.

Description: This article describes the financial modelers’ manifesto. Focus is on how difficult it is to model financial instruments when there is a human element involved.

Description: The crisis has spread due to a systematic failure of the regulatory system. Over the last 20 years, regulations that fostered market stability were eliminated and new financial instruments were allowed to propagate without any real oversight. Instead of bailing out weak financial firms, we should be liquidating them. All doubtful assets need to be written-downs. We need accurate and transparent accounting. Government can help in this effort by cleaning up our accounting system. But it needs to stop being an investor propping up those that should be in the morgue. It needs to conservatively regulate all financial instruments. It should foster liquidity and stoke demand.

Description: This article discusses the reliance the banking industry placed on sophisticated mathematical models.

Description: In this article, the section chairperson talks about some challenges that are presenting the actuarial profession, and Risk Management professionals and how to turn them into new opportunities for business.

Description: This article focuses on risk mitigation strategies and intends to demonstrate how an organization, a financial institution in this case, realized significant positive impact on its bottom line by integrating risk management in its overall business development strategy.