The Insurance Operational Risk Loss Data Report for 2024 reveal the lowest losses in risk for insurers since 2018.
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In the face of geopolitical challenges and economic uncertainties throughout 2023, the operational risk losses for the 24 global insurance members reached a remarkable low, totalling €478m, marking the lowest figure in the past six years and a significant decline from the €715m reported in 2022.
The decrease is largely driven by very low levels of conduct related losses (largely categorised as clients, products & business practices). ORX members reported €45.3m of loss in this category compared to €150.7m in 2022. Transaction related losses, such as those related to failed transaction processing or accounting errors, also fell from €478m in 2022 to €354m in 2023.
Steve Bishop, Research & Information Director at ORX comments:
“While it’s positive to see conduct type losses decreasing – especially following the significant spikes we saw during the pandemic – these figures may not tell the full story. The final total loss in both of these categories can increase over time as new loss impacts are realised and cases are settled.”
Annual loss frequency also decreased in 2023 (1,035) and there has been a gradual decrease in event frequency each year, with 537 fewer events submitted in 2023 than in 2020. The average size of an operational risk loss event in 2023 was €462,220. The ten largest losses accounted for €131m, or 27%, of total gross loss.
External fraud
2023 saw a decreasing trend of 26 fewer external fraud events (114) than in 2018. However, across the last three years the frequency of external fraud events has stayed roughly the same.
External fraud losses in 2023 were also lower on average than previous years. The median external fraud event in 2022 was €60k, one of the lowest it has been in the last six years (last 5-year average was €63k).
Across the regions
Western Europe has the highest number of losses with 3,168 with a total loss of €2.2bn. This is followed by North America with 3,050 (€1.6bn) and Asia Pacific with 561 (€325m).
Steve Bishop, ORX Research & Information Director comments:
