The coming orsa rules are a requirement for insurers to. The naic orsa model law was adopted in september 2012, and is being considered for adoption in the u. Most companies have at least some stochastic liability calculations for both stat and gaapifrs thus, solvency can. That first orsa filing, expected to be mandated as a result of state adoption of the naics risk management and orsa model act, will represent, in the words of pennsylvania state regulator steve johnson, a gamechanger for the insurance industry. As adopted by financial condition e committee september 6, 2012. Naic orsa and risk capital casualty actuarial society. Apr 10, 2012 during the naics 2012 spring national meeting, the naic began to develop training materials related to the orsa guidance manual, and regulators announced that 15 insurance companies have agreed. Solvency ii how to conduct the orsa requirements, eiopa. An insurer that is subject to the orsa requirement should consider the guidance provided in this manual when conducting its orsa and compiling orsa sits ummary report. Below is a brief summary of some of the key content in each section and our examination of ways in which the actuarial perspective and skill set can be used to enhance the value of an orsa. As adopted by financial condition e committee september. The naic in 2012 adopted a risk management and own risk and solvency assessment model act model act.
Guidance manuals, handbooks, surveys and research on a wide variety of issues. Companies domiciled in states that passed legislation adopting the naics model act should be actively. During the naics 2012 spring national meeting, the naic began to develop training materials related to the orsa guidance manual, and regulators announced that 15 insurance companies have agreed to participate in an orsa feedback project that will enable regulators to discuss the orsa requirement. If implemented correctly, orsa may help insurers to extract additional value from their compliance investments. Regulatory bodies naic own risk solvency assessment orsa. Namic our positions own risk solvency assessment orsa. The orsa guidance manual, which was adopted by the naic executive ex committee and plenary in march 2012, provides information for insurers on performing its orsa and documenting risk policies and procedures. This ss contains pra expectations of firms regarding their orsa, including the orsa report, the firms policy regarding its orsa and the associated processes. Bermuda monetary authority bma their orsa fillings by april 30, 2012. Most companies have at least some stochastic liability calculations for both stat and gaapifrs thus, solvency can not be assessed without stochastic analysis. Beyond establishing an orsa process, insurers will need to prepare materials to evidence the efficacy of the process to external parties. As the process and results are likely to include proprietary information, any report received by the regulators shall be held confidential as provided by state statutes. The naics orsa guidance manual indicates that those insurers required.
Assessment orsa feedback pilot projects observations of the orsa e subgroup 201220. With a number of fundamental elements in the orsa guidance manual having been approved in november 2011 by the naics group solvency issues working group, the orsa is very close to being adopted. The naic hopes to have an orsa requirement in place by the end of 2012 and to give insurers a year to vet the process. The united states is no exception, with the naic including the orsa as part of its solvency modernization initiative smi. The draft guidance manual for the oasisd version of the oasis data set, effective january 1, 2019, has been posted to the downloads section below. As with the naic model act, texas orsa is targeted at larger companies and groups. The number of states participating has grown from 12 in 2012, 16 in 20 to 26 in the 2014 study. Academy comments on orsa guidance manual by lou baccam issuu. January 1, 2015 a new regulatory requirement intended to. Distressed companies in rbc action levels may also be required to produce an orsa at the regulators discretion. Description of the insurers risk management framework, which is a highlevel summary of its own risk management framework, including risk appetite, tolerance and limits, and internal controls. Added to the general guidance section clarification that the.
The model law requires that a company have a risk management framework in place, that it regularly conduct a risk assessment addressing the factors laid out in the model act and in the naic orsa guidance manual and that it provide an orsa. Insurance group supervision april 2012, cipr newsletter. Many insurers, however, find it hard to design an operational approach for orsa, often considered as primarily a regulatory requirement. January 1, 2015 currently adopted by 20 states a new regulatory requirement intended to. Added to the general guidance section clarification that the foundation of the orsa summary report. Texas orsa filings will be effected in accordance with the naics published orsa guidance manual as it is updated from time to time. Orsa own risk and solvency assessment naic model law adopted in september 2012 naic guidance manual revised march 20 effective date.
The final results were published in a document entitled naic own risk and solvency assessment orsa guidance manual, november 2011. The model act has been implemented by 34 states to date, although some of these states will not require the summary report to be filed until 2016 or 2017. In the multiyear framework, a first approach based on closed formulas has been studied by bonnin and al. Insurance project report to the steering committee. Naic own risk and solvency assessment orsa guidance manual. Although development of such supervisory guidance has just begun, some of the guidance is expected to be centered on the five key principles developed in 2012 as part of the naic orsa guidance manual.
As reported previously, the naic approved the risk management and own risk and solvency assessment model act in september 2012. In march 2012, the financial condition e subcommittee was instructed by the naic executive ex. Naic own risk and solvency assessment guidance manual orsas two primary goals to foster an effective level of enterprise risk management at all insurers, through which each insurer identifies and quantifies its material and relevant risks, using techniques that are appropriate to the nature, scale. Foster effective enterprise risk management provide a group level perspective on risk and capital required of. That first orsa filing, expected to be mandated as a result of state adoption of the naics risk management and orsa model act, will represent, in the words of pennsylvania state regulator steve johnson, a. Orsa guidance manual provides an overview of three general topics divided by sections that would need to be included in an orsa report. Aug 14, 2015 the national association of insurance commissioners has completed their third own risk solvency assessment orsa feedback pilot project.
Understand orsa before implementing it by anthony shapella and owen stein. The orsa implementation e subgroup of the group solvency issues e working group will. Texas enacts own risk and solvency assessment orsa. Model risk management for insurance companies insurance companies are being required to implement a model risk management mrm program. American academy of actuaries actuaries and own risk and.
Academy comments on orsa guidance manual by lou baccam. Solvency ii own risk and solvency assessment orsa what is orsa. The national association of insurance commissioners own risk and solvency assessment orsa guidance manual states. The orsa summary report shall be prepared consistent with the orsa guidance manual, subject to the requirements of subsection b of this section. Understand orsa before implementing it casualty actuarial society. Description of risk management framework section 2. An insurer using this manual should refer to the laws adopted by the insurers state of domicile when determining its requirements for risk management, its own risk and solvency assessment. The state legislative process is still ongoing, but we can anticipate the regulation to be fully in place in 2015. Naic orsa overview orsa own risk and solvency assessment naic model law adopted in september 2012 naic guidance manual revised march 20 effective date. The content of the international orsa regulatory requirements chart the chart has been provided by individuals at the request of the joint orsa subcommittee of the insurance regulation committee and the enterprise and financial risk committee of the iaa. The naics orsa guidance manual indicates that those insurers required to conduct an orsa will also be required to provide a highlevel summary report annually to the domiciliary regulator, if requested.
The orsa guidance manual defines solvency as, for a given accounting basis, the state where, and extent to which, assets exceed liabilities. Orsa section 1description of the insurers risk management framework section 1 of the naic orsa guidance manual defines the. The naic has also issued its own orsa manual, which sets out requirements broadly similar to those of eiopa. The own risk and solvency assessment orsa is becoming a key part of the regulatory framework for us insurers. Six applications to orsa effective orsa implementation how to ace orsa agenda ow. This ss should be read together with ss4115, solvency ii. A draft guidance manual that was very prescriptive was exposed for comment early in the summer. Overall, the solvency ii requirements for orsa will probably be more prescriptive than in the u.
Subject to paragraph c, an insurer, or the insurance group of which the insurer is a member, shall regularly conduct an orsa consistent with and comparable to the process in the orsa guidance manual. To our knowledge, no acceleration methodology has been adapted to the overall solvency needs assessment framework without needing relatively strong model assumptions. By statute, the orsa summary reports are not subject to public disclosure. National association of insurance commissioners own risk and solvency assessment orsa guidance manual, 2014 2017 edition. The purpose of this manual is intended to provide guidance to an insurer andor the insurance group herein referred to as insurer or insurers with regard to reporting on its own risk and solvency assessment orsa as outlined within the form b insurance holding company system annual registration statement of the naics.
Insurance regulation on the move orsa how to be prepared. Maxwell 1 naic own risk solvency assessment orsa guidance manual as of march 2014, page 6. In september 2012, the national association of insurance commissioners. The 12page orsa report template output see paper for lots of detail the 25step standard orsa model the risk book the 12page orsa report template the orsa record contents list 19 the 12page orsa report template the place of the orsa in the risk management system introduction the need for a standard approach to.
As the process and results are likely to include proprietary and forwardlooking information, any orsa. At its 2012 spring meeting, the naic adopted its orsa guidance manual the manual. The orsa guidance manual, which was adopted by the naic executive ex committee and plenary in march 2012, provides information for. The own risk and solvency assessment orsa is on its way october 2012, cipr newsletter. The state legislative process is still ongoing, but we. The naics orsa guidance manual indicates that those insurers required to conduct an orsa will also be required to provide a highlevel summary re. The following summarizes the most significant changes since the march 20 edition. Under the model the commissioner can request an annual filing of orsa summary reports. Rm and orsa model act fall 2012 orsa guidance manual ongoing 2012 pilot program focus on closing gaps in process, governance and documentation 20 pilot program enhancements to the orsa guidance manual examiners handbook training effective date of january 1, 2015. Saenz, on behalf of the american academy of actuaries 1 orsa subgroup, i appreciate the opportunity to provide comments on the december 2012. Orsa in the united states background and current status.
The orsa was developed in response to a number of key regulatory drivers. Apr 04, 20 as reported previously, the naic approved the risk management and own risk and solvency assessment model act in september 2012. A component of the insurers enterprise risk management erm framework a confidential internal assessment appropriate to the nature, scale, and. The office of management and budget omb approved the final oasisd guidance manual, effective january 1, 2019. August 2012 risk management risk culture and disclosures insurers business plan, and the sufficiency of capital. Our comments, by section of the manual, are as follows page numbers refer to the redline version.
The term orsa guidance manual shall mean the current version of the own risk and solvency assessment guidance manual developed and adopted by the national association of insurance commissioners naic and as amended from time to time. The orsa should reflect an insurers own risk and solvency. Orsa guidance manual provides five key principles for an. An insurer that is subject to the orsa requirement should consider the guidance provided in this manual when conducting its orsa and compiling the summary report. Own risk solvency assessment orsa linking risk management. As originally drafted and adopted in the spring of 2012, the orsa guidance manual provided guidance regarding the conduct, internal documentation and reporting on the orsa of the insurer andor the insurance group of which the insurer is a member. Continue to provide and enhance an enterprise risk management erm education program for regulators in support of the own risk and solvency assessment orsa implementation. The naic releases draft orsa model act for public comment. The model requires companies over a certain size threshold to conduct an annual own risk and solvency assessment consistent with the orsa guidance manual adopted in 2011. The number of companies participating in the pilot projects has also grown from 14 in the 2012 study to 28 in the 2014 study.
The orsa must be conducted at least annually and whenever there have been significant changes to the risk profile of. This edition of the naic own risk and solvency assessment orsa guidance manual has been revised from the previous edition. Copies may be obtained from naic, 1100 walnut street, ste. Documentation and supporting information shall be maintained and made available upon examination or upon request of the commissioner. The 12page orsa report template institute and faculty. The naic adopted the risk management and own risk and solvency assessment rmorsa model act on. Section 5 of the model act constitutes a legal basis to perform orsa at the group level. The orsa guidance manual includes information such as the goals of the orsa, detailed descriptions of the three sections of an orsa report, and orsa exemption criteria 2011 pwc 9 orsa guidance manual adopted by naic executive committee in march 2012 draft orsa model act released for public comment in april 2012. At its 2012 springmeeting, the naic adopted its orsa guidance manual, which sets out the principles to be adopted by us regulators. The orsa guidance manual, updated in march 20, provides instruction for the contents and completion of the orsa document.
Solvency assessment within the orsa framework issues and. The naic is also proposing an annual orsa highlevel summary report to be filed on request from the domiciliary state, although efforts are underway to make this annual filing mandatory for the larger insurers. Own risk and solvency assessment orsa report file an orsa summary report with the insurance. Naic orsa feedback pilot project pinnacle actuarial resources. The own risk and solvency assessment orsa a regulatory. Origins and implications for enterprise risk management 2015, journal of insurance regulation vol. January 1, 2018 this guideline sets out osfis expectations with respect to the own risk and solvency assessment orsa of federally regulated insurers fri or insurer footnote 1.