Mastering Operational Risk, 2nd Edition

12

Insurance

Operational risk and insurance

Insurance speaks to cause

Buying insurance

The insurance carrier

Alternative risk transfer mechanisms

Conclusion

OPERATIONAL RISK AND INSURANCE

For some operational risks it’s simple – or at least fairly simple. There’s a fire, you put in a claim, you get the money. The same happens with a burglary, or if an employee is critically ill. Subject to appropriate proof, the insurer pays under the policy. For many operational risks, however, it might be fairer to say that paying the insurance policy premium is akin to taking out an option on a court case, a view policy-holders have been holding since at least 1384. Here is an extract from a letter written by Francesco di Marco Datini, merchant of Prato, ...