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S.26.15 – Internal model: Operational risk

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S.26.15 – Internal model: Operational risk

General comments:

This section relates to annual submission of information for individual entities.

This template shall be reported based on availability according to the internal model architecture and risk profile when possible with reasonable effort. The data to be reported shall be agreed between national supervisory authorities and insurance and reinsurance undertakings.

Each undertaking can use their own operational risks classification.

The columns C0020-C0060 contain information on the scenarios defined by the undertaking. In case of multi-tier classifications, data on at least the two highest levels of operational risk should be provided (define L1 as the highest level and L2 the immediately lower one, if present). All the information to be filled in is related to the one year forecasted loss probability distributions.

For an event type category defined as Level 1 (L1) occurrence, all numerical information (SCR, quantiles) should refer to the aggregation of the risk made at that level. Of course, each category identified in the Level 2 (L2) occurrence could come from an aggregation of lower levels loss distributions.

Internal scenario classification [free text]	Unique ID [number]	Unique ID of parent level. [number]
L2 A	201	101
L2 B	202	101
L2 C	203	101	Note that the ID of the containing
L2 D	204	102	level is not valued for L1 levels, as the ultimate parent level is the
L2 E	205	102	operational risk itself.
L1 A	101
L1 B	102

Operational Risk

	ITEM	INSTRUCTIONS
C0010/R0010	Is Basel L1 classification used?	Identify if the seven high-level categories (L1) specified in Basel II are used.
		One of the options in the following closed list shall be used: – Yes

		– No

C0010/R0020	Is Basel L1 and L2 classification used?	Identify if the Basel Level 1 and 2 categories and their hierarchy (which L2 are included in each L1) specified in Basel II [Annex 7].
		One of the options in the following closed list shall be used:
		– Yes – No
C0020	Scenario name	This table should be completed by all undertakings, also in the cases where the undertaking answers ‘No’ to ‘C0010/R0010’ and/or ‘C0010/R0020’, with the names of the internal scenarios used for Operational risk calculations by the internal model.
C0030	Unique ID	This is a unique ID of the internal scenario. This should be consistent across different reporting periods. This is a numeric field.
C0040	Unique ID of parent level.	This is a unique ID of the immediate parent internal scenario. This should be consistent across different reporting periods. This is a numeric field.
C0050	Basel L1 classification mapping	For completion by undertakings which answer ‘Yes’ in C0010/R0010 or the mapping to Basel L1 exists. Field should be empty if the scenario is higher than level 2 in the classification.
		One of the options in the following closed list shall be used: 1) Internal fraud 2) External fraud 3) Employment practices and workspace safety 4) Damage to physical assets 5) Business disruption and system failures 6) Clients, products and business practices 7) Execution, delivery and process management
C0060	Basel L2 classification mapping	For completion by undertakings which answer ‘Yes’ in C0010/R0020 or the mapping to Basel L2 exists. Field should be empty if the scenario is higher than level 2 in the classification.
		The occurrence “Other” can be used in case the risk could be classified in a Level 1 Basel category but there is not a Level 2 one.
		One of the options in the following closed list shall be used:

1)	Internal fraud - Unauthorized activity
2)	Internal fraud - Theft and fraud
3)	Internal fraud - Other
4)	External fraud - Theft and fraud
5)	External fraud - Systems security
6)	External fraud - Other
7)	Employment practices and workspace safety -
	Employee relations
8)	Employment practices and workspace safety -
	Safe environment
9)	Employment practices and workspace safety -
	Diversity and discrimination
	10) Employment practices and workspace safety -
	Other
	11) Damage to physical assets - Disasters and
	other events
	12) Damage to physical assets - Other
	13) Business disruption and system failures -
	Systems
	14) Business disruption and system failures -
	Other
	15) Clients, products and business practices -
	Suitability, disclosure and fiduciary
	16) Clients, products and business practices -
	Improper business or market practices
	17) Clients, products and business practices -
	Product flaws
	18) Clients, products and business practices -
	Selection, sponsorship and exposure

	19) Clients, products and business practices -
	Advisory activities
	20) Clients, products and business practices -
	Other
	21) Execution, delivery and process management
	- Transaction capture, execution and
	maintenance
	22) Execution, delivery and process management
	- Monitoring and reporting
	23) Execution, delivery and process management
	- Customer intake and documentation
	24) Execution, delivery and process management
	- Customer / client account management
	25) Execution, delivery and process management
	- Trade counterparties
	26) Execution, delivery and process management
	- Vendors and suppliers

		27) Execution, delivery and process management - Other
C0070	Probability Distribution	Identify the probability distribution. One of the options in the following closed list shall be used: 1. Poisson-lognormal 2. Lognormal 3. Poisson-Pareto 4. Empirical 5. Pareto 6. Other, please specify 7. Obtained by aggregation of lower levels Item 1 to 6 to be used in case the probability distribution is quantified; item 7 in case the probability distribution is obtained by aggregation of
C0080	Solvency Capital Requirement	lower level distributions. Solvency capital requirement net of risk mitigating contracts per scenario.
C0090-C0210	Percentiles	Percentiles of the loss distribution (losses corresponds to the right tail) net of risk mitigating contracts per scenario.
C0220/R0030	Total undiversified Level 2	Sum of stand-alone capital requirements contributions for Level 2 operational risks classification. Any lower aggregation level should be already considered.
C0220/R0040	Sum of diversification inside Level 2 items	Difference between the sum of undiversified leaf risks SCR and C0220/R0030. This amount should be reported as a negative value. For example, if the lower level is L3 (the ones quantified with probability distributions), enter the difference between the sum of Level 3 and the sum of Level 2 (standalone).
C0220/R0050	Total undiversified Level 1	Sum of stand-alone capital requirements contributions for Level 1 operational risks classification (if applicable, net of risk mitigating contracts). Any lower aggregation level should be already considered.
C0220/R0060	Operational risk – diversification between Level 1 items	Difference of C0220/R0050 and C0220/R0070. This amount should be reported as a negative value.

Solvency II software

C0220/R0070	Operational risk - diversified	Diversified operational risk capital requirement net of risk mitigating contracts.