[OR] [MLRE] [E3] [CBS] [2] [ITo] Establish Impact Tolerances

CBS-2 Claims Processing & Settlement

Introduction

Operational resilience requires financial institutions to define the level of disruption they can tolerate for each Critical Business Service (CBS) before causing intolerable harm to customers, counterparties, financial stability, or regulatory standing.

In line with the expectations outlined in the 2025 Discussion Paper on Operational Resilience by Bank Negara Malaysia (BNM), impact tolerance must be expressed in measurable terms such as time, volume, data loss, and service degradation thresholds.

For CBS-2 Claims Processing & Settlement, the ability to process and settle claims accurately and promptly is central to maintaining cedant trust, meeting contractual obligations, and safeguarding market confidence.

Disruptions to this CBS may result in financial loss to cedants, reputational erosion, regulatory breaches, and systemic confidence risk—particularly during catastrophe events or high-volume mortality scenarios.

This chapter defines appropriate impact tolerances for each Sub-CBS within CBS-2, translating operational resilience principles into measurable thresholds such as Maximum Tolerable Downtime (MTD) and Maximum Tolerable Data Loss (MTDL), together with qualitative customer and regulatory impact considerations.

Table P4: Establish Impact Tolerance for CBS-2 

Alignment with 2025 BNM Operational Resilience Expectations

The tolerances above reflect principles emphasised in the 2025 BNM Discussion Paper, including:

• Defining impact tolerance based on intolerable harm, not internal recovery targets.
• Considering both time-based and data integrity-based tolerances.
• Addressing systemic stress scenarios, such as pandemic mortality spikes or catastrophe claims surges.
• Recognising financial system confidence and cedant liquidity as impact dimensions.
• Ensuring board oversight and periodic review of tolerance calibration.

For example:

• Settlement disbursement (Sub-CBS 2.7) carries a shorter MTD due to direct financial and liquidity implications.
• Record archival (Sub-CBS 2.9) carries zero tolerance for permanent data loss due to statutory compliance requirements.
• Continuous improvement (Sub-CBS 2.10) has a longer tolerance because it does not create immediate intolerable harm.

Establishing impact tolerances for CBS-2 Claims Processing & Settlement provides Malaysian Life Reinsurance with a measurable boundary between acceptable disruption and intolerable harm. By defining explicit MTD and MTDL thresholds for each Sub-CBS, the organisation can:

• Prioritise resilience investment based on the severity of impact.
• Design scenario testing aligned with severe but plausible disruptions.
• Strengthen board-level oversight of operational resilience.
• Demonstrate compliance with BNM’s evolving operational resilience expectations.

Impact tolerance is not static. It must be reviewed periodically in light of business growth, digital transformation, outsourcing dependencies, and emerging systemic risks.

For a reinsurer whose credibility depends on timely and accurate claims settlement, maintaining resilience within these defined tolerances is fundamental to sustaining market confidence and long-term stability.

Building Organisational Resilience: An Operational Resilience Guide for Malaysian Life Reinsurance
eBook 3: Starting Your OR Implementation
CBS-2 Claims Processing & Settlement
CBS-2 DP	CBS-2 MD	CBS-2 MPR	CBS-2 ITo	CBS-2 SuPS	CBS-2 ST

For organisations looking to accelerate their journey, BCM Institute’s training and certification programs, including the OR-5000 Operational Resilience Expert Implementer course, provide in-depth insights and practical toolkits for effectively embedding this model.

 

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