TransAsia'S relationship with Financial Institutions started in 1996 through our involvement with one of the leading Banks of India.
Like any Corporate, Financial Institutions also have a fundamental exposure on operational risk to Assets, Liabilities and People and Technology. However, the requirement of aligning operational risks to international norms in a heavily regulated industry brings certain differing perspectives to the process of translating operational risk exposures into the safety net of insurance such that insurance does not remain a cost but can be used as a tool for more efficient use of capital.
Our focus is therefore to start with the Operational Risk team and understand the variables thrown in terms of both potential frequency losses as also catastrophic events which can severely impact the quarterly profitability of the institution. Most times it will also impact various ratios and compliances related to Basel II and III
This helps in identifying how much insurance to buy and which Insurance policy to buy.. But insurance efficacy is not just related to quantum. Two other significant attributes decide its efficacy; Policy Wording and Claims Management
We use an international template which better helps FIs prefer and obtain claims. Whilst the average incurred claims ratio for the FI industry as a whole varies between 150% and 250% the average paid claims varies between 30%-50%. This means from a cash flow basis FIs pay more premium but get less results. Also the average settlement period for a claim is close to 30 months. We have managed the claim life cycle and brought this down to 14-18 months. We have also increased the paid claims to closer 70%.
In insurance terms we have seamlessly integrated the following risk transfer policies:
1. Bankers Blanket Bond
2. Professional Indemnity
3. Directors and Officers Liability
4. Cyber Security Compliances related to Basel II and III
All of these are interlinked as the border line between pure fraud and fraud caused by incidental negligence is thin. Similarly the difference between operational negligence and management negligence depends on the merit of each case.
Thus an integrated approach to risk management and insurance purchase is not just optimal but essential from an FI point of view. Our team has both bankers and insurance professionals allowing us to seamlessly provide and implement solutions.