Annual Insurance Loss Report 2018
- 5 July 2018
Every year ORX produces a high-level summary of our global insurance operational loss database. It highlights key trends in operational risk loss within the insurance and reinsurance industry. This year we have also produced our eighth global banking loss report which examines trends in over 350,000 operational loss events between the years of 2012 and 2017. You can find out more about the banking report here.
ORX Global Insurance Service
The ORX Insurance Service was established in 2015 with six original members. By June 2018, we had grown to 17 insurance members from around the globe, including a good proportion of the world's largest insurance and re-insurance firms.
Our strategic commitment is to continue investing in the service to support enhancements in both operational risk measurement and management in the insurance sector.
This is the second annual report on the ORX insurance operational risk loss database. It summarises our database and illustrates trends in operational risk losses within the insurance industry. This edition of the report is based on 5,438 loss events reported between 1 January 2012 and 31 December 2017.
Following a post-crisis period where operational losses were volatile, the past two years have brought relative stability and typically lower losses.
As the ORX Insurance service continues to grow, we have seen a steady increase in the frequency of loss events reported from 724 in 2012 to 1,038 in 2017.
The average size of a loss event in 2017 was around €430,000, which is less than half of the average loss in 2012. As a proportion of gross income, this equates to €0.96 lost per €1k in 2017, which is less than half of 2012's figure of €2.06. This reduction appears to be due to a fall in the size of the largest industry losses.
When examining the geographic distribution of operational loss within the Insurance industry, North America and Western Europe dominate.
North America and Western Europe witnessed the largest frequency of loss events and the largest proportion of total loss. However, this is largely indicative of the ORX membership.
Event and business lines breakdown
The most common and costly event type observed was Execution, Delivery and Process Management. This type of event accounted for 48 per cent of all loss events and 49 per cent of total loss between 2012 and 2017.
As a proportion of gross written premiums, the life and non-life business lines have both experienced steadily decreasing rates of loss. Whereas, insurers that managed assets witnessed fairly volatile operational losses.