Own Risk and Solvency Assessment (ORSA)
How the ORSA process helps insurers assess their own risk profile and capital adequacy.
ORSA Overview
The Own Risk and Solvency Assessment (ORSA) is a regulatory requirement for large insurance groups and individual insurers meeting certain premium thresholds. Adopted through the NAIC's Risk Management and ORSA Model Act, it requires insurers to conduct an internal assessment of their material risks, the sufficiency of their capital resources, and the quality of their risk management framework. The ORSA process is forward-looking and stress-test oriented, going beyond the static, formula-based approach of traditional RBC calculations to assess how the company's capital position would fare under adverse scenarios.
Actuarial Role in ORSA
Actuaries are central to the ORSA process. They identify and quantify insurance risks, develop stress scenarios and reverse stress tests, and project the company's capital position under various conditions. The ORSA Summary Report, filed confidentially with regulators, describes the company's risk management framework, risk assessment results, group capital adequacy, and prospective solvency analysis. Actuaries must ensure that the scenarios tested are relevant and severe enough to be meaningful while also being plausible. The ORSA process drives meaningful engagement between actuarial, risk management, finance, and senior leadership teams.