NAIC ORSA Feedback Pilot Project
Laura Maxwell

NAIC ORSA Feedback Pilot Project

Are You at Risk for Not Being Ready for ORSA?

Laura Maxwell August 14, 2015 Posted in: Blog Posts, ORSA
The National Association of Insurance Commissioners has completed their third Own Risk Solvency Assessment (ORSA) Feedback Pilot project. The number of states participating has grown from 12 in 2012, 16 in 2013 to 26 in the 2014 study. The number of companies participating in the pilot projects has also grown from 14 in the 2012 study to 28 in the 2014 study.

Thirty-one states have adopted the Risk Management and Own Risk and Solvency Assessment Model Act (#505) as of May 20. Many of these states will require filing of ORSA Summary reports by the end of this year. Six states are considering adopting the Model Act. The NAIC estimated the 26 states that participated in the 2014 Pilot Project will expect 210 ORSA Summary Reports to be filed.

The NAIC’s comments on the pilot projects provide useful insight to insurance companies as they prepare their own ORSA Summary Reports. The NAIC believes the Summary Reports submitted were generally in compliance with the NAIC ORSA Guidance Manual. Description of the Insurer’s Risk Management Framework (Section 1) was the most complete, while Sections 2 (Insurer’s Assessment of Risk Exposures) and 3 (Group Assessment of Risk Capital and Prospective Solvency Assessment) could use more detail.

The NAIC report on the Pilot Project states the following are opportunities for improving the quality of ORSA Summary Reports:
  1. Providing additional explanation of the risk management strategy in the context of the key business strategy objectives.
  2. Highlighting the maturity of the ERM process and status of development by covering what has been developed and embedded in the organization and what is still in development.
  3. Offering additional information and clarity regarding the legal entities included in the scope of the group ORSA.
  4. Maintaining consistency between the key risks identified in Section 1, those assessed in terms of exposure in Section 2 and those quantified in terms of risk capital in Section 3.
  5. Providing additional support for the methodologies and assumptions selected in Section 2 for assessing and stress testing the exposures for key risks and to quantify risk capital in Section 3.
  6. Offering additional evidence regarding how the management team utilizes the information provided in the ORSA Summary Report to pursue its business strategy objectives and how the board of directors utilizes it to oversee the company.
The NAIC report on the Pilot Project continues with lists of positive improvements and suggested opportunities for improvement for the executive summary and each section of the ORSA Summary Report.

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