The ABI (Association of British Insurers) and SAS, the leader in risk intelligence, today launched ORIC (Operational Risk Insurance Consortium), a new international initiative to assist the insurance industry with quantifying and managing operational risk.
Consortium members, who include Friends Provident, HBOS, Legal & General, Standard Life and AXA, will benefit from the ability to aggregate the experience of the insurance industry's operational loss data, which will help to improve understanding and management of their own internal data, as well as assisting with regulatory requirements such the new Individual Capital Adequacy (ICA) standards.
The new database will provide quarterly information on losses due to human error, external events and failed processes or systems, by both monetary amount and narrative description of the event.
Peter Vipond, ABI Director of Financial Regulation and Taxation said: "With new capital requirement rules from the FSA, and continuing regulatory developments in Europe such as Solvency II, the need for sophisticated operational risk management tools in the insurance industry has never been greater. Fifteen insurance companies have already signed up to ORIC, and a further thirty have expressed an interest.
"We believe this will be an invaluable tool for companies seeking to reduce loss from operational risk and enhance their own risk processes."
The ABI will oversee the consortium, including administration of the data and ensuring, through the use of the SAS application, data quality and consistency. SAS, which already has extensive experience in supporting other successful consortiums, is providing the technology that includes converting the loss event data into risk intelligence, data management and data quality, as well as benchmarking and reporting capabilities.
Peyman Mestchian, Head of the Risk Intelligence Practice, SAS EMEA, said: "Lack of quality loss data is recognised as a key obstacle to successful operational risk measurement. ORIC will provide a quality controlled database to facilitate risk measurement and decision making. ABI's decision to partner with SAS is a reflection of SAS' thought-leadership in enterprise-wide risk management and its reputation for delivering high quality software solutions."
In a worldwide survey conducted by SAS in 2004, over a third of organisations reported that they suffered operational losses of over $20 million per annum. The Consortium believes it will help reduce those losses to the insurance industry, possibly saving millions of pounds in the process.