Loss leaders
Operational risk is potentially the biggest risk faced by insurers – and also one of the most difficult to model. However, as a number of loss data aggregation initiatives globally either emerge or mature, insurers are better placed to quantify their op risk exposure
Insurance is at heart a simple business. Analyse the likelihood of a certain event occurring, aggregate a pool of this risk from different sources, charge a premium for your services and wait for the profits to emerge. Of course, life is not that simple, and while it is possible to run a Monte Carlo simulation that demonstrates the impact movements in interest rates will have on insurers’ portfolios, it is less obvious how to predict operational risk (op risk) failures that, in many cases, are
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