A captive audience
Bert Crielaard, Davide Bazzarello, Fabio Piacenza and Aldo Soprano look at hedging operational risk using insurance captives
THE new Basel capital Accord recognises insurance contracts as effective means to mitigate op risk1. When a financial institution demonstrates its risk transfer is effective, it will be taken into account in the capital requirements measurement. This explains banks' increasing interest in innovative risk transfer solutions, such as captive insurance vehicles.
Here, we look at the typical structure
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