The ABI (Association of British Insurers) and SAS, a risk intelligence firm, have launched ORIC (Operational Risk Insurance Consortium), a new international initiative to assist the insurance industry with quantifying and managing operational risk.
The new database will provide quarterly information on losses due to human error, external events and failed processes or systems, by both monetary amount and narrative description of the event.
Consortium members, who include Friends Provident, HBOS, Legal & General, RBS Insurance, Standard Life and BUPA, will benefit from the ability to aggregate the experience of the insurance industry's operational loss data. This will help to improve understanding and management of their own internal data, as well as potentially assisting with regulatory requirements such as the new Individual Capital Adequacy (ICA) standards.
Peter Vipond, ABI director of financial regulation and taxation said: "With new capital requirement rules from the FSA, and continuing regulatory developments in Europe such as Solvency II, the need for sophisticated operational risk management tools in the insurance industry has never been greater. Sixteen insurance companies have already signed up to ORIC, and a further thirty have expressed an interest.
“We believe this will be an invaluable tool for companies seeking to reduce loss from operational risk and enhance their own risk processes”.