|
The risks to be faced when running an enterprise include credit risk, country risk, interest rate risk, operational risk, market risk, and many more, among them operational risk is gaining more and more attention in recent years. Operational risk is indeed a risk that should not be underestimated because it can happen both internally and externally, its frequency and amplitude can vary in a wide range, and the damage it brings can result in a huge impact to the enterprise. And it is the same case to the life industry.
This research intends to investigate how Taiwanese life industry decides their order of priority for the seven types of operational risk, what risk quantification models and capital requirement methods life insurers use when calculating risk-based capital or RBC, as well as the risks life insurers may encounter in their business process. Through in-depth interviews and questionnaires analysis, the conclusions are as follows:
Currently, the number one threatening risk most of the life insurers think they are facing is external fraud. If divided by market share to differentiate the size of the companies, large-scale life insurers still regard external fraud as the most important risk, while medium and small-scale life insurers consider risks concerning customers, products, and business practice are of primary importance. In addition, under pairwise comparison of the importance of risks, nearly all the risk management personnel in Taiwanese life industry respond with the same answer with regard to the order of priority for the seven types of operational risk; they think every type of operational risk is equally important. And when it comes to RBC calculation, the prevailing methods most life insurers adopt nowadays are the bottom-up method for risk quantification, and the standard method for capital requirements.
|