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Estimation Of Operative Risk For Fraud In The Car Insurance Industry

Author

Listed:
  • Jorge Aníbal Restrepo Morales
  • Santiago Medina Hurtado

Abstract

The regulatory framework for assessing and risk measurement in most companies focuses primarily on proposals of the New Capital Accord (Basel II). The Basel Committee gives importance to the concept of operational risk and requires that financial institutions cover possible loses with capital. The goal is to identify expected losses because of different events that might arise in firm management. This work develops a model to estimate the monetary loss due to car theft for Columbian insurance companies. We estimate the probability functions of monetary losses for car theft. First we estimate the distribution functions of the number of car thefts and for the monetary loss. Then, we use Monte Carlo simulation to identify the severity of expected losses. The results and conclusions will be useful for insurance firms. Using the results here, they can set up guidelines to improve risk management.

Suggested Citation

  • Jorge Aníbal Restrepo Morales & Santiago Medina Hurtado, 2012. "Estimation Of Operative Risk For Fraud In The Car Insurance Industry," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 6(3), pages 73-83.
    • Handle: RePEc:ibf:gjbres:v:6:y:2012:i:3:p:73-83
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    References listed on IDEAS

    as
    1. Marco Moscadelli, 2004. "The modelling of operational risk: experience with the analysis of the data collected by the Basel Committee," Temi di discussione (Economic working papers) 517, Bank of Italy, Economic Research and International Relations Area.
    2. Pailhé, Cristina & Delfiner, Miguel & Mangialavori, Ana, 2007. "Buenas practicas para la administracion del riesgo operacional en entidades financieras [Sound practices for the management of operational risk in financial institutions (in Spanish)]," MPRA Paper 1803, University Library of Munich, Germany, revised Jan 2007.
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    Cited by:

    1. Kresojević Bojan & Gajić Milica, 2019. "Application of the T-Test in Health Insurance Cost Analysis: Large Data Sets," Economics, Sciendo, vol. 7(2), pages 157-167, December.

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    More about this item

    Keywords

    Insurance; Operational Risk; Simulation; Loss Distribution Aggregated;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

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