Own Risk Solvency Assessment (ORSA)
The ORSA portion of Solvency II should be based on a companywide risk framework, enabling an insurer to truly embed the required risk management of Solvency II in the organization. Based on this risk management, an insurer is capable of properly managing and controlling its risks and supporting the ORSA processes, ultimately underpinning sufficient funding of all material risks and liabilities.
The ORSA processes
There are two, similar six step ORSA processes.
The regular process is the annual board analysis and justification procedure. It must support for the following three years that the company is sufficiently solvent, given its business strategy, material risks, liabilities and capital management constraints.
The non-regular process is less detailed. It should be performed once a quarter or triggered by certain specific events. For example, the introduction of a new product, a dip in stock value or a request of the supervisor. The daily application of risk management provides the basis for the preparation of the first steps of ORSA. Since each insurance company may have its own processes, procedures and organizational structure, workflows to actually execute an ORSA is unique for each company. As a result, insurance companies are required to provide their own specific interpretation and set-up of risk management to meet the Solvency II requirements.