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The Continuing Challenges with ORSA

Oct 9, 2014

ORSA (Own Risk and Solvency Assessment) filings continue to be a challenge for the insurance industry; as we near the end of summer, it still appears that there is some disparity between the industry expectations and the regulator considerations.  The recent regulator presentations and considerations do show improvement between the first and second pilot projects, per the NAIC presentation at the August Financial Summit, as shown below:




Number of States Participating    



Estimated Number of ORSA Reports
Expected to be Filed to participating States



% of Total Estimated ORSA Reports
Expected to be Filed



Number of Insurer/Groups Participating



The following were some of the key points highlighted by the NAIC:

  • Quality of reports improved from 2012 to 2013.
  • The property and casualty and life insurance industries appear to have a much better handle/more robust ERM processes than the health care industry.
  • Second-year participants improved on their ORSA reporting from the prior report.
  • First-year participants met key requirements and were generally better.
  • With minor exceptions, reports were reflective of robust processes, per participating states. 
  • Only three reports could greatly benefit from material improvements to better reflect group framework.

The regulators have continued to provide feedback to the industry to further refine their expectations. Some of the key points of consideration for the industry include the following:

  • The insurers should prepare for lengthy walk-throughs and discussions with regulators over the details and data supporting their ORSA Report, including stress testing parameters, data quality and capital adequacy.
  • The ORSA Report should be consistent with information and reports provided to the company board of directors and show consistency in reporting on an ongoing basis.
  • Documentation showing key controls within the organization as it relates to the risks identified should be provided. Use of flow charts and diagrams to visualize and simplify narratives and to show rigor surrounding the ORSA process, and the key mitigating controls should be considered.
  • ORSA report should provide details on actual risk limits of the company, including limits for specific risks as well as for risk categories. The use of heat maps and risk rankings should also be provided where available.
  • Combined stress testing and reverse stress testing  should be included in the ORSA Report
  • Discussion of increasing risks (risk migration) and planning surrounding it, as well as risk mitigation strategies, should be provided. 
  • Current data for available and required capital should be provided.
  • Comparative review of data over years to reflect the stress tests and capital adequacy calculations should be performed. 
  •  Diversification benefit discussion, as well as detailed compensation information as it correlates to the risks and risk taking, should be provided.
  • Reasons for changing limits and tolerances where applicable should be provided.

We continue to find that the observations noted hold true, based on our knowledge of the ‘pulse of the industry.’ Companies that have not fully engaged in developing their ORSA report and ERM processes will be challenged in providing the regulators with robust data and might face additional regulatory scrutiny due to the quality or lack thereof of their ORSA reports and filings.

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