Operational Risk and Solvency II: A Practitioner Perspective

Wim van de Kraats

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

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