09 July 2009
Published in: Operational risk
Op risk charge is "excessive and punitive"
The proposed changes to the operational risk standard formula do little to address the insurance industry's concerns about how Solvency II will handle operational risk, says Val Amos, head of risk at Hiscox. The changes are outlined in consultation paper 53, issued by the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) last week.
"The new proposals may push the industry towards trying to find a solution to the modelling problem as many firms will find the revised charge [which doubles operational risk capital] excessive and punitive," Amos notes in an opinion piece for InsuranceERM (see IERM, Opinion, 10 July, "We need clearer and more sophisticated thinking on op risk). "However, we urgently need some clearer and more sophisticated thinking on the measurement of operational risk."
Amos says the proposals do not do enough to encourage firms to model the risk because "the standard required to get model approval is unreasonable" and she describes the consultation paper as a "missed opportunity" for CEIOPS.