
risk exposures that are under the control of the institution.
Firms will be faced with the question of theoretically insuring
what they have the power to prevent, and in fact, the condi-
tions of coverage may dictate that comprehensive controls be
in effect.
As options for insuring operational risk grow, programmes
will become more accepted, particularly for high-exposure
events. These are beyond the risk appetite of any institution,
and insurance in such cases becomes valuable. It will be impor-
tant to reflect these insurance benefits in economic capital
models, or businesses will bear a double economic burden –
the insurance premium and a capital charge. ...