Operational risk losses continued to fall in 2021
- Jadeson Ortega
- Jul 13, 2022
- 2 min read

While the impact of the pandemic and conduct risk remains high on the risk agenda for insurers, the gross losses in operational risk are continuing to fall according to the latest ORX annual loss reporting figures.
The latest ORX report reveals that operational risk losses reported by global insurance companies continued to fall in 2021 despite the challenging operating environment.
The global loss figures report a decline in total gross loss across the insurance community. This is despite the challenging environment created by both external threats, including geopolitics, cyber risk, the economy, and internal developments, particularly as the industry moves to digitalize.
In 2021 there were 1,155 operational risk loss events (submitted) totaling EUR522.8m ($530m) in gross loss. The lower total gross loss – with the exception of 2020, total gross loss has remained reasonably steady year on year since 2018. There was a significant spike in 2020 at EUR1.2bn due in part to coronavirus related losses, while 2021 saw the lowest gross loss since 2017. The average annual gross loss from 2016-2021 is EUR752m.
Total number of events reduces slightly – the annual loss frequency was slightly lower in 2021 than the average for 2016-2021, with 326 fewer loss events submitted than in the previous year.
Size of average risk loss event - the average size of an operational risk loss event in 2021 was EUR452,607. In 2020 the average size of a loss was almost double this at EUR823,232 due in part to large coronavirus losses as well as large events classified as ‘transaction, capture execution and maintenance’ which includes losses due to poor execution of regular business tasks for example accounting and data entry errors.
The life business line experienced the largest proportion of total gross loss in 2021 (41%), whilst non-life business lines incurred 39%, corporate level losses 17% and asset management with 4% of the total gross loss.
ORX director of research and information Steve Bishop said, “This year we’ve seen a significant reduction in gross loss. Given the levels of change facing global insurance and the turbulent external environment, it will be interesting to see if the reduction continues through 2022.
“Next year’s results could well reflect a number of factors, including the impact from the Ukraine conflict, losses related to the increasing cyber security threat and to economic turbulence, in particular arising from supplier issues, conduct or external fraud,” said Mr Bishop.
The onset of the pandemic has also altered the operational risk landscape and the risk profiles of financial institutions.
In 2021, conduct risk remains a concern for insurers and an area of strong regulatory focus, not least because this risk type can cause large losses to financial institutions. 199 conduct events were reported in 2021, amounting to EUR182.6m gross loss.
Source: asiainsurancereview.com
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