Basel II: the insurance mitigation conundrum
Bert Crielaard, Davide Bazzarello and Aldo Soprano describe some major challenges for regulatory recognition of insurance policies in the operational risk capital requirements. Some suggestions are provided to overcome these critical issues
The new Basel capital Accord - as well as the European Capital Adequacy Directive - mentions the impact of insurance policies in the calculation of operational capital-at-risk. If risk mitigation can be proved, supervisors could allow a reduction of up to 20% of the minimum capital requirement.
The following is an analysis of the characteristics the insurance policies must have to qualify for
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