Operational risk overlooked by insurers

Insurers need to find a better balance in risk management, according to a study by consultants Grant Thornton.

The Risk Appetite study included the views of 43 chief executive officers and managing directors from leading London insurers.

“Improvements that have been made have been driven by regulation such as Solvency II, which has caused insurers to introduce quantifiable risk measures,” said Stephen Kelly, risk and capital management practice leader at Grant Thornton.

“Operational risk, however, remains a particular challenge as it is inherently difficult to quantify. This is due to a lack of reliable historical data and the prevalence of human involvement and potential for human error.

“We are urging insurance businesses not to lose sight of operational risk by ensuring that risk management strategies have been independently challenged and have appropriate balance in their approach, addressing all the risks to which the firm is exposed.”