Solvency II framework sets a lot of challenges for every insurance company as it requires for a more sensitive, balanced and sophisticated risk analysis to prepare and establish better risk coverage.  Operational risk is one of the most critical and important risks that affects every insurance company’s activity and development as it causes unexpected losses incurred from inadequate internal processes, people and systems, or from other external events. The concept of the paper is to identify, analyse, assess, measure, manage and control operational risk effect on insurance company’s activity with the help of the discriminant model created by the authors. The discriminant model combination with the stochastic methods allow the authors of the paper to use for risk assessment such risk measures as the Value – at – risk and the Tail Value – at – risk. Also the developed method enables to analyse and measure each factor's effect on total result. Through the conducted research the authors of the paper would measure the operational risk possible effect on insurance company’s activity in order to prepare the possible operational risk management plan. The main aim of the operational risk management is to minimize operational risk possible effect through its occurring probability minimization and reduction of possible losses. In order to achieve the target of the stated research the authors of the paper use a theoretical analysis of the scientific literature, analytical methods, statistical and mathematical methods and comparative methods with the purpose to study the elements and functions of the operational risk management and Solvency II Directive requirements. The authors of the paper would like to present the achieved results as the Panel Discussion with Questions since this method includes moderated question-and-answer period.

*Awarded ERM/Financial Track Prize