Introduction: Starting the Solvency II Journey
Solvency II: The journey so far
Internal Models and Solvency II
Review of the Capital Adequacy Framework in Singapore
Insurance Liabilities Under IFRS 4 Phase II and Solvency II: Almost the Same Thing?
Solvency II and Mutual Insurance Companies
The Journey Towards an Approved Internal Model
The Road to Solvency II for a Life Insurance Company
Managing Model Risk
Solvency II and Reinsurance
ORSA: A Forward-looking Approach to Risk and Capital Management
Risk Governance: A Framework to Support Better Decision-making and a Journey Towards Continuous Improvement
Operational Risk and Solvency II: A Practitioner Perspective
Reporting Challenges under Solvency II: The Allianz Experience
The Audit of Solvency II Information
The Holistic Balance Sheet: A Different European Approach for Pension Funds?
Capital for Operational Risk: Some Fundamental Flaws
Reputational Risk: Success is Trust-dependent
Insurance companies have been increasing their efforts on their operational risk programmes, driven by internal considerations based on operational loss experience and maturing risk functions, but also due to regulatory requirements under Solvency II. This chapter will share my personal insights from actual experience, along with recommendations for the effective implementation of operational risk management (ORM). It will focus on Solvency II considerations, with proven concepts for meeting regulatory expectations presented in a pragmatic and business value-adding manner.
The chapter has been structured as follows: the first section examines issues in organisation and governance, the second moves on to explore operational risk frameworks, while the third section explores operational risk assessment and modelling.
ORGANISATION AND GOVERNANCE
What is operational risk?
Operational risk is as old as the human race and has always been managed, but nevertheless is considered as a relatively young risk category by many risk professionals. There can be many reasons for this, but one of the most plausible arguments would be that an internal control framework combined with a strong audi