Annual Insurance Loss Report 2019

  • 24 September 2019

Every year ORX produces a free report on our global insurance loss database. The report explores the frequency, severity and key trends in operational risk loss events across the insurance and reinsurance industry. We also publish a report summarising the data in our banking database. This year’s insurance report examines the last six years’ worth of data in our database – 2013 to 2018.

These reports are just one way in which we achieve our mission of supporting operational and non-financial risk management, providing vital information to professionals around the globe. We also share some of our research, data and resources publicly. Explore our free resources section to see what we have to offer. Or, find out what benefits ORX Membership could bring to your firm.

Download the report for free to read our analysis in detail, or read on for the highlights and top findings.

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Annual Insurance Loss Report 2019

Report highlights

ORX global insurance database doubles in size

We launched a service specifically for insurers in 2015. Since then, we're delighted to see that our database has doubled in size.

At the end of 2018, the global insurance database contained more than €4.6 billion in total gross loss, over 6,600 operational risk events and had 17 insurers submitting data to it  – including some of the world's leading insurance firms.

ORX insurance loss database doubles in size end 2018

Number and value of loss events decrease in 2018

In 2018, we saw the lowest number of operational risk loss events since 2015. This is despite the fact that more institutions are submitting data than before due to the increase in the number of our insurance members.

With €413 million in total gross loss, 2018 represents one of the lowest levels of severity we’ve seen in the last six years. The average gross loss was also at one of the lowest points since 2013, and gross loss as a percentage of annual income was the smallest across the six year timeframe.

Whether this indicates a long-term trend of gross loss and frequencies of reported events per company decreasing remains to be seen.

Non-life and Life business lines make up 77% of gross loss

The non-life business line accounted for the largest proportion of total gross loss between 2013 and 2018, making up 39 per cent of total losses. This was very closely followed by life at 38 per cent. The average annual gross loss in non-life was €255 million, while the average for the life business line was slightly lower at €251 million. Together, these two business lines make up 77 per cent of total gross loss.

A breakdown of the Life and Non-Life business lines in the ORX global insurance data infographic

Execution, Delivery and Process Management top event type

Execution, delivery and process management (EDPM) was the event type with both the highest frequency and largest total loss. There were 2,956 EDPM events in the global insurance database, which total €1.9 billion.

A focus on material risks – cyber and conduct

This year, for the first time we looked at the data in light of the top operational risks on the agenda of financial firms over the coming years. According to participants of the 2019 Operational Risk Horizon study, cyber and conduct risk are two of the most pressing operational risks across the industry.

Cyber and information security risk losses average €1.5 million

One of the challenges of cyber and IT security risk is having adequate data to facilitate the understanding and assessment of this risk type. This is compounded by the use of Basel event types, which don’t support the identification of cyber-related incidents. In response to this, we’ve been working with experts from our member firms to create a cyber and information security (CISR) programme to overcome these challenges.

Using the risk mapping developed as part of the programme, we’ve been able to identify 32 relevant losses, with an average loss of €1.5 million. It's worth bearing in mind that cyber incidents often have a non-financial impact, such as data breaches and business disruption. In over half of the 32 losses, the descriptions indicated that the event led to business disruption.

Explore our work on cyber and information security

Conduct-related losses peaked in 2017

Regulatory focus and a succession of fines and settlements, resulting in large losses, has driven concerns about conduct risk. The average annual conduct-related gross loss was €279 million from 2013 to 2018. In 2017, conduct risk losses accounted for a huge 64 per cent of the total gross loss. This decreased in 2018, when conduct-related losses made up 29 per cent of the annual total at €121 million. Individually, the cost of conduct-related losses can be very high which explains why risk managers are so focused on this risk type.

Geographic distribution of losses

Geographic distribution of losses reported to ORX in 2013 to 2018

As we would expect, the regions with the highest number and value of loss events in our database were North America and Western Europe. This reflects the geography of our current insurance members who are primarily based in those regions. As our insurance membership grows, we should see this distribution begin to change.

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Annual Insurance Loss Report 2019