Insuring operational risk (slides)

Document description

Some Issues: Capacity constraints. Withdrawal of insurers. Disputes and delays in payment (eg due to exclusions and language problems). Complexity of op-risk. How can we establish proximate cause? More issues: Mis-pricing due to lack of data and quantification problems. Can we ever quantify? Adverse selection. Moral hazard. Insurance as a cause of systemic risk? Recommendations for the banks' `Insurance' strategies to consider: Insure specific operational risks. Buy a comprehensive `basket' product. Insure only `big' (or small) risks? Consider ART. Recommendations for the banks. A bank's insurance decision is very personal! It will all come down to: Its circumstances (e.g. size, business lines, credit rating etc). The level/quality of insurance cover. Product features. Price recommendations for Regulators.