• Ciaran Hosty

Insurance recoveries is an increasing area of focus for firms

Following the release of ORIC International's 2020 Capital Benchmarking Survey it was noted that a greater number of firms are considering insurance recoveries within their risk mitigation methodologies. 11 participants from this year's survey considered insurance recoveries within their risk mitigation methodology, compared to just 6 as per the 2019 survey.

Methodology for insurance recoveries

The IRM survey, ‘Aligning operational risk and insurance’ (April 2018) concluded that to

get the best synergies, firms need to internally link the insurance purchase decision and the capital modelling approach. When using insurance recoveries as a mitigant, best practice includes:


• Identifying specifications in insurance policy requirements, e.g. maximum coverage limits (considered by 92% of participating firms who consider insurance recoveries)

• Identifying recovery success of prior insurance claims and the hurdle of insurance deductibles

• Limiting the recovery time horizon i.e. get cashflows within 1 year (considered by 25% of participating firms who consider insurance recoveries)


• Taking account of the credit risk of the insurance provider (considered by 33% of participating firms who consider insurance recoveries)


Validating insurance mitigation

From the survey, when undertaking validation of insurance recoveries, 55% of firms focused on mapping risk scenarios to policy coverage and exclusions and 36% of participants relied on internal expert judgement. Only 9% of participating firms held independent discussions with brokers, which may be more valid as they are likely to have extensive claim data.


Policy Coverage


A variety of insurance policies are used by participants within their risk mitigation methodologies. Cybercrime and business interruption were the most common insurance policies factored in, with both policies being considered by 79% of participants. This seems logical given the increasing focus from industry stakeholders on avoiding customer harm and improving operational resilience.


In 2018, ORIC International undertook an exercise with Marsh to review industry claims data and map these to their 38 benchmark scenarios. This exercise has allowed firms to identify standard insurance policies that can be used to mitigate risk scenarios and also highlight the likelihood of achieving recoveries.

Want to find out more?


Discover more key takeaways from ORIC International's 2020 Capital Benchmarking Survey in our summary report HERE.


If you'd like more information on how you can take part in next year's survey, which is open to both member and non-member participants from the insurance and investment management industries, please contact enquiries@oricinternational.com

© 2020 by ORIC International

Operational Risk Consortium Limited is a company registered in England and Wales with Company Number 05510364

Its Registered Office is 107 Cheapside, London EC2V 6DN. VAT Registration No. 882 3901 09