Research On The Application Of Insurance To The Commercial Banks' Operational Risk Management

The New Basel Capital Accord takes the lead in bringing operational risks into the commercial banks' risk management framework, and also confirms the risk mitigating effects of operational risk insurance, thus insurance, as an important tool of operational risk management, came into the focus of international banks. During the past couple years the loss events of operational risks in China's commercial banks happened frequently, but the application of insurance for banks covering operational risks still drops behind. And the academic circles in China paid insufficient attention to operational risks and their insurance. This paper makes the theoretical and empirical researches on the application of insurance in the commercial banks' operational risk management, which has a certain value in theoretical analysis and practical operation.Firstly, this paper details the basic theory of commercial banks' operational risks and their management, in which comparing the current situation of operational risks in china's commercial banks with that in internationally active banks, the result shows that operational risks in China's commercial banks exist widely, but the loss event types are mainly internal fraud and external fraud. Secondly, this paper explores the basic theory of the application of insurance to commercial banks' risk management, and the current situation and problems of operational risk insurance. Thirdly, this paper incorporates insurance contracts into an operational risk model based on loss distribution measurement approach, and then uses the operational loss data of China's commercial banks to make an empirical analysis. At last this paper analyzes the development and application of operational risk insurance in China is a trend based on many favorite situations, but also there are some obstacles to this trend, thus the regulators, commercial banks and insurance companies in China need make efforts together.