Part of the regulatory capital requirement of a commercial bank can be replaced by the insurance limit provided by an Operational Risk Insurance (OpRisk) and the losses incurred there would be settled by insurance companies. There are not yet many providers who offer this type of insurance and have the corresponding know-how.
In March 2016, the Basel Committee published a draft new framework for the calculation of minimum capital for operational risks (OpRisk). The new framework replaces all existing approaches for determining the capital requirement with a single non-model-based measurement approach (Standardised Measurement Approach, SMA) and thus makes obsolete the model-based advanced measurement approach (AMA). The main motive for introducing a single capital approach was to improve the comparability of results across all institutions and to address weaknesses of previous approaches without calling into question the overall framework in pillar 1.
According to the Basel Committee, the calculation and implementation should be comparatively simple and suitable for institutions of different sizes and complexity. However, the framework has not yet been finally adopted. The OpRisk policy offers the possibility to substitute a relatively expensive equity capital for banks by purchasing an insurance policy relatively cheaply. In times of low margins, this could in the future become an interesting alternative source of financing for banks.