Own Risk and Solvency Assessment (ORSA)

Own Risk and Solvency Assessment (ORSA) is a self-assessment process used by insurance companies to evaluate their risk management framework and solvency position. ORSA ensures that insurers regularly assess their ability to meet policyholder obligations under various risk scenarios, including economic downturns or unexpected claims events. It is a regulatory requirement in many jurisdictions and aims to promote sound risk management practices within the insurance industry.

Example

An insurance company conducts an ORSA to evaluate its solvency under a scenario of increasing natural disaster claims, ensuring it has sufficient capital to meet policyholder obligations.

Key points

• A self-assessment process for insurers to evaluate risk management and solvency.

• Ensures insurers can meet obligations under different risk scenarios.

• Required by regulators to promote sound risk management practices.

Quick Answers to Curious Questions

Why is ORSA important for insurance companies?

ORSA helps insurers ensure they have sufficient capital and risk management practices in place to meet policyholder obligations, even under adverse conditions.

How does ORSA promote financial stability in the insurance industry?

By requiring insurers to regularly assess their solvency and risk exposure, ORSA helps maintain the overall stability of the insurance sector.

What factors are considered in an ORSA assessment?

ORSA considers factors such as capital adequacy, risk management practices, and the ability to meet obligations under various economic and market scenarios.