ORSA: Background, Regulatory Requirements and Overview

Bogie Ozdemir

Own Risk and Solvency Assessment (ORSA) is an internal programme for self-assessing a firm’s risk profile and corresponding capital adequacy, and is analogous to the Internal Capital Adequacy Assessment Process (ICAAP) that has been implemented by banks around the world. It is a major insurance regulatory requirement that is being promoted by international regulators. The ORSA programme of each regulator is slightly different, although there are common core elements that regulators have coordinated through their participation in the International Association of Insurance Supervisors (IAIS). Through the IAIS, international regulators have developed what they call a Common Framework (ComFrame) and the codification of common Insurance Core Principles (ICPs), which IAIS members agree to follow in their home jurisdictions.

ORSA is a framework and a process built on an enterprise risk management (ERM) framework, with the following characteristics.

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  All material and emerging risks are identified, managed and quantified where possible in terms of self-determined risk capital (demand for capital), which corresponds to the target ratings stated in the board-approved risk appetite