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Measuring and managing market, credit and Op risk [74]

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Bullet points include: Basel Accord accepted that insurance could mitigate against operational risk “specifically, insurance could be used to externalize the risk of potentially low frequency, high severity losses, such as errors and ...” “Committee agrees that, in principle, such mitigation should be reflected in the capital requirement for operational risk” Insurance could thus place a ‘market’ price on such risks (e.g. natural catastrophe risk), but in practice Asymmetry of information, aka ‘selection’ Agency incentive misalignments Methodologies for quantifying (and managing?) operational risk ought therefore in principle to be similar to those used in non-life insurance

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