What insurers can learn from banks on scenario analysis for op risk management

Picture this

Operational risk

With the advent of Solvency II, insurance and reinsurance companies must prudently and proactively manage operational risk and allocate a capital charge for it. To assess and quantify the operational risk capital charge through an internal model, the industry frequently uses scenario analysis. This powerful tool is pragmatic, implementable and cost-effective. Scenario analysis fosters out-of-the-box thinking to efficiently address risks in a world of known and unknown unknowns. Scenario analy