The valuation of operational risk in non - life insurance companies

Abstract

Master thesis covers operational risk valuation approach in non – life insurance companies. Scientific literature review and many other publications disclosed operational risk exist longer than we know, but as a separate field started to be evaluated only recently. The precedent given was worldwide known events of many financial institutions failure due inefficient risk management, as some of the risks were not taking into consideration at all and global financial crisis. Operational risk as such is not targeted seeking the benefit, but occurs itself, because of normal company’s ac-tivity. That makes it specific and difficult to measure and evaluate. These facts led to establishment of guidelines for such risk management – vey first was banking sector with Basel system and ac-cording to this example, Solvency II Directive was developed. Solvency II created a methodology how operational risk should be measured calculated. Using Solvency II guidelines for operational risk valuation, it was calculated the Lithuanian non – life insurance market operational risk value and made an analysis of this indicator correlation with current solvency requirements such as avail-able solvency margin and required solvency margin.