Insurers must change their ways to comply with Basel II

New York – The Basel Committee on Banking Supervision has granted financial institutions the option of using insurance to offset operational risk charges under the advanced measurement approach in the third consultative paper (CP3) – but not without reservations.

One of the biggest issues the Basel Committee, and many national financial supervisors, have with the use of insurance as a capital offset is that the claims payment processes employed by carriers can be long and tortuous. Banks can’t be sure of receiving the stated benefit on the policy in an efficient and timely fashion, if ever.

Indeed, the attempts by some of New York’s largest financial institutions to obtain insurance compensation as a result of the terrorist attacks in New York on

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