Even a one in 500 occurrence does happen once every 500 times, and if that occurrence could threaten the franchise value of the derivatives counterparty it is an important concern for risk aversion. But we have to be careful of how we view these ostensibly low-probability events.
They are low-probability only if we presume that the reality from which these events derive is best represented by a single bell-shaped probability distribution, be it a normal distribution or even a fat-tailed one. Modern quantitative approaches to risk measurement and risk management take as their starting-point historical experience with market price fluctuations, which is statistically summarized in probability distributions.