UNDERSTANDING ORSA A GLOBAL RISK REGULATORY REGIME FOR INSURERS

Transcription

1 UNDERSTANDING ORSA A GLOBAL RISK REGULATORY REGIME FOR INSURERS The views and opinions expressed in this paper are those of the authors and do not necessarily reflect the official policy or position of Thomson Reuters.

2 UNDERSTANDING ORSA A GLOBAL RISK REGULATORY REGIME FOR INSURERS 2 TABLE OF CONTENTS WHAT IS ORSA? 3 INTRODUCTION 4 THE UK AND EUROPE - SOLENCY II AND ORSA 5 NORTH AMERICA 6 ASIA PACIFIC 7 SOUTH AFRICA 8 ORSA AROUND THE GLOBE 8 CONCLUSION 8 ORSA JURISDICTION TABLE 9

3 UNDERSTANDING ORSA A GLOBAL RISK REGULATORY REGIME FOR INSURERS 3 WHAT IS ORSA? An ORSA (Own Risk and Solvency Assessment) is an internal assessment of the risks associated with an insurer s current, strategic business plan, including whether it has the capital resources to support these risks. It is a form of Enterprise Risk Management (ERM). An ORSA is a top down process: the Board and senior management are required to take responsibility for it. An ORSA implementation must be proportional to the nature, scale and complexity of the business. Where appropriate, an ORSA should be assured through internal or external independent review. An ORSA must encompass all reasonably foreseeable and relevant material risks. It should create a holistic risk profile that includes those risks for which there is quantitative information, as well as those that are more difficult to quantify, like operational and business risks. For groups, it will include risks that arise from the structure of the group and events within it, and avoid double counting of capital. An ORSA must compare the organization s risk profile with the risk appetite as set out by the Board. It must also demonstrate that the available capital resources are adequate when compared to the risk profile. It should link the risk appetite and profile with the organization s risk management actions and internal control systems. An ORSA must be forward-looking and assess risk and capital resources for the full period of the company s strategic business plan. This will typically be longer than the period for regulatory capital, and will require projections regarding the organization s future financial position and capital resources. Companies will have to undertake scenario analysis of stress conditions, as well as reverse stress testing to identify plausible scenarios that could lead to business failure. An ORSA is a tool for supervisors to understand the risk exposure and solvency position of insurers. Organizations must provide supervisors with appropriate information to demonstrate the adequacy and soundness of their ERM framework and processes. An ORSA should be undertaken regularly, probably annually, as well as after any significant changes in an organization s risk profile.

4 UNDERSTANDING ORSA A GLOBAL RISK REGULATORY REGIME FOR INSURERS 4 INTRODUCTION Prior to the 2008 global financial crisis, regulators with oversight of the insurance industry saw little need for comprehensive risk assessments. Insurance firms were considered to have predictable long-term liabilities and saleable assets. Often they were not considered to be exposed to the same degree of risk as banks, or to pose any systemic risk to the financial system. In many jurisdictions there were no specific requirements to have ERM in place, or to report on it to supervisors. However, the financial crisis showed us that the business modelling of insurance firms had shortcomings, and that a failure to fully assess insurance firms exposure to risk and capital adequacy, especially in times of financial duress, could be dangerous. When undertaken, the assessments on whether firms had sufficient capital to maintain their risk profiles were more backward-looking than forward-looking and did not sufficiently take into account unknown unknowns. The concept of the Own Risk and Solvency Assessment, or ORSA, arose from an understanding of these defects. It mostly has its origins in the EU s Solvency II Directive, which focuses on driving firms to take a risk-based approach when assessing capital adequacy. A couple of other jurisdictions, including the UK s Individual Capital Adequacy Standards (ICAS) and Canada s Dynamic Capital Adequacy Testing (DCAT) frameworks, partly resembled ORSAs prior to the authoring of Solvency II in Europe. However, the creation of ORSA under Solvency II was considered to be a step change in the evolution of ERM for insurers. The International Association of Insurance Supervisors (IAIS), an international standard-setting body based in Basel, Switzerland, adopted ORSA as part of its revised Insurance Core Principles in ORSA lies at the center of Insurance Core Principle 16 (ICP 16) Enterprise Risk Management for Solvency Purposes, which requires supervisors to request an ORSA from insurers. Jurisdictions are adopting ORSA over a range of different timelines [see table on page 10]. In theory, all jurisdictions that are members of the IAIS are supposed to adhere largely to ICP 16 and that encompasses most of the world. The IAIS has almost 140 member states, which account for 97% of global insurance premiums. However, the IAIS is a voluntary membership organization, not a treaty organization, so it cannot compel its members to adopt particular insurance regulations. This accounts for the patchy implementation of ORSA some member countries have adopted it wholesale, others have adopted modified versions of it, and others have not adopted it at all. The pressure from the IAIS to adopt ORSA is increasing, however. In 2016 it will assess jurisdictions to ascertain whether they have implemented ICP 16 or are in the process of doing so. Although ORSA has not been adopted by all IAIS members across the world, the list of jurisdictions that have adopted it wholesale is large. The EU, US, Canada, Singapore, Hong Kong, Japan, South Korea and South Africa have all done so a sign of broad acceptance of the value of ORSA in insurance regulation. As many insurance organizations around the world struggle to define what ORSA means to them, this paper will take a closer look at the role of ORSA, its evolution, and the different regulatory approaches being adopted around the world.

5 UNDERSTANDING ORSA A GLOBAL RISK REGULATORY REGIME FOR INSURERS 5 THE UK AND EUROPE SOLVENCY II AND ORSA The aim of Solvency II is to create a revised set of capital requirements for insurers across the EU. Work on Solvency II began in 2004, with the Solvency II Directive passed into law in November However, the financial crisis, combined with a deeper understanding of some of the consequences of Solvency II s capital regime, has led the EU to revise some key elements of that framework. The legislation that will accomplish these revisions is contained in the Omnibus II Directive (OMDII), which was passed by the European parliament in March The directive set the Solvency II transposition date the deadline for EU member countries to put Solvency II into law and regulation in their own countries as 31 March The application date the date when Solvency II must be operational in member countries is January 1, Implementation of the Solvency II regulatory framework, which includes ORSA, is overseen by the European Insurance and Occupational Pensions Authority (EIOPA). EIOPA is part of the European System of Financial Supervisors. It is tasked with supporting and coordinating insurance supervision within the EU, as well as improving protection for insurance consumers. In February 2015 EIOPA published the final reports on the public consultation related to the Solvency II Guidelines on ORSA. EIOPA intends to issue the final version of the ORSA guidelines in mid The guidelines, which will become applicable on 1 January 2016, are aimed at ensuring a convergent approach to preparation for ORSA across all EU jurisdictions. They contain, in EIOPA s words, incentives to a better understanding of the undertaking s overall solvency needs and capital allocation as well as the interrelation between risk and capital management in a forward-looking perspective. EIOPA believes that binding national legislation does not necessarily have to be introduced in order to make insurers comply with the outcome specified in a guideline. However, it may be necessary in certain cases, depending on the national legal framework. EIOPA has also devised an interim system ahead of the 2016 implementation of Solvency II s ORSA framework. As part of the preparation for the implementation of Solvency II, it asked national authorities to put in place guidelines on the Forward Looking Assessment of Own Risks (FLAOR) from 1 January These are guidelines based on the ORSA principles. National competent authorities should send a progress report on the application of these guidelines to EIOPA each February. In the UK, the Prudential Regulation Authority, an arm of the Bank of England, set out the following key points about ORSA in supervisory statement SS4/13, published in December 2013: The PRA will not prescribe the format or content of the ORSA supervisory report, recognizing that it needs to reflect the specific risk profile and governance mechanism of each firm and group. Firms are encouraged to work towards ensuring that their ORSA adequately captures all possible risks to which the firm could be exposed. The PRA will review assessments on a proportionate basis and give feedback where appropriate. The PRA does not prescribe the point in the year at which the ORSA is to be submitted; this should be detailed in the firm s ORSA policy. In 2013 Julian Adams, Deputy Head of the PRA and Executive Director of Insurance, described ORSA as in many respects the cornerstone of Solvency II.

6 UNDERSTANDING ORSA A GLOBAL RISK REGULATORY REGIME FOR INSURERS 6 NORTH AMERICA The US The global financial crisis exposed weaknesses in US insurance regulation. These included the lack of a comprehensive solvency and risk reporting framework. The National Association of Insurance Commissioners (NAIC) the US standard-setting and regulatory support organization created and governed by the chief insurance regulators of all 50 states, the District of Columbia and five US territories took steps to rectify this by devising the Risk Management and Own Risk Solvency Assessment Model Act (RMORSA). The organization s executive committee and plenary adopted RMORSA in September Under RMORSA, large- and medium-sized US insurance groups and insurers are required to conduct an ORSA regularly, starting in The ORSA applies to any individual US insurer that writes more than $500 million of annual direct written and assumed premiums, and insurance groups that collectively write more than $1 billion of annual direct written and assumed premiums. However, in mid-2015, not all states have accepted RMORSA. Insurance is regulated in the US on a state-by-state basis and by 1 April 2015, 23 had implemented RMORSA, with 13 considering whether to adopt it. Fourteen states had not yet taken any action. They may, though, be put under even more pressure than before to accept it. At NAIC s Summer National Meeting in August 2015, its Financial Regulation Standards and Accreditation (F) Committee is set to vote on whether to make ORSA a requirement for continuing accreditation of state insurance departments by the NAIC. This would oblige all accredited jurisdictions to adopt language that is substantially similar to the significant elements of ORSA by 1 January NAIC accreditation is, in NAIC s words, a certification given to a state insurance department once it has demonstrated it has met and continues to meet an assortment of legal, financial, organizational, and licensing and change of control standards as determined by a committee of its peers. It is, therefore, a much desired stamp of approval, though failure to be accredited does not carry any legal or financial penalties. Under RMORSA, an insurer that is subject to the ORSA requirements is expected to: Regularly, at least annually, conduct an ORSA to assess the adequacy of its risk management framework, and current and estimated projected future solvency position. Internally document the process and results of the assessment. Provide a confidential high-level ORSA summary report annually to the lead state commissioner if the insurer is a member of an insurance group and, upon request, to the domiciliary state regulator. ORSA poses a number of difficulties in the US, including the challenge for insurers to modify their processes and embrace the concepts embedded in the ORSA guidance manual. One of the initial tasks for regulators was developing a guidance manual that laid out the broad principles of risk management along with the ORSA process and ORSA summary reports, but was not overly prescriptive as to exactly how risk management must be implemented. Regulators are expected to encounter similar challenges as they begin to develop regulator guidance for reviewing ORSA summary reports making sure that the guidance provides enough direction to create a consistent process, but without doing so in too rigid a manner. Other challenges are expected, but this is probably the most prominent. Canada The Office of the Superintendent of Financial Institutions required all insurers to complete their first ORSA by the end of An insurer must document its ORSA in a report to the Board at least annually. This must include an effective assessment of its own capital needs, a determination of its internal targets, and a view on the adequacy of its current and likely future solvency positions. The Board and senior management are responsible for the oversight of the design and implementation of the ORSA, as well as regular monitoring and reporting.

7 UNDERSTANDING ORSA A GLOBAL RISK REGULATORY REGIME FOR INSURERS 7 ASIA PACIFIC Solvency II may not fit the requirements of all markets in the Asia Pacific region. However, Europe s threepillared risk framework has undoubtedly helped to shape some of the already adopted approaches and processes currently under consideration in several jurisdictions. The concept of risk-based solvency is not new to regulators in Asia Pacific, as many have been planning to make adjustments to their risk management frameworks for years. However, the IAIS 2011 revised ICPs, the acceleration of change in the global insurance industry and the rate of progress made in Europe and North America in applying best practice to risk management have caused many regulators in Asia Pacific to speed up the process of aligning their frameworks with international standards. The Australian Prudential Regulatory Authority (APRA) has completed its Life and General Insurance Capital project (LAGIC), which reviewed the capital standards for insurers. Under the LAGIC regime, in 2012 formal requirements for Internal Capital Adequacy Assessments (ICAAPs), which are similar to ORSA, were released. Implementation took place on 1 January The changes were designed to increase risk sensitivity and align capital standards across financial services industries. LAGIC includes an individual capital adequacy assessment report similar to ORSA. From April 1, 2015, all insurance companies in Japan must start submitting annual ORSA reports to the Financial Services Agency (FSA). The FSA says that it takes a relatively hands-off approach, and does not provide a detailed prescription for the contents of the reports. In 2009 Malaysia s central bank, Bank Negara Malaysia, introduced risk-based capital requirements. In 2012, guidelines on ICAAPs were introduced, which included guidelines that outlined the risk-based capital (RBC) framework that insurers must establish to manage capital adequacy. Singapore s risk-based framework for insurers, which was introduced in 2004, has also been revised. In 2012, the Monetary Authority of Singapore (MAS) issued a consultation paper of the revised risk-based capital regime, and the final ERM requirements were published in April The MAS requires all licensed insurers to adopt ORSA in their ERM frameworks as of 1 January Tier One and non-tier One insurers have differing reporting deadlines. There are other jurisdictions in Asia, notably South Korea, that are in the process of considering a transformation of their risk measurement and management requirements. The Insurance Authority in Hong Kong published its first consultation paper on the development of a new risk-based capital framework for the Hong Kong insurance industry in September It proposes group-wide ORSAs, stating: ORSA should be an integral part of the business strategy of an insurer, and should be taken into account on an ongoing basis by the insurer in making strategic decisions. It also proposes that capital requirements should address all relevant and material categories of risk of insurers, and that insurers should be required to quantify the capital they need to hold for any risks not addressed by these risk categories through their ORSA. The paper calls for ORSA assessments at least once a year, and additionally when there are significant changes to the risk profile of the insurer. Mainland China has not adopted ORSA, but it has adopted a new regime based on principles very similar to those of Solvency II, called the China Risk-Oriented Solvency System (C-ROSS). C-ROSS has three pillars: quantitative capital requirements, qualitative regulatory requirements and market discipline. It aims to create a linkage between capital requirements and the risk profile of the undertaking, provide incentives to improve risk management and make Chinese insurers more competitive. It is likely that there will be a transitional period in 2015 before full implementation in The move to a more risk-sensitive method of calculation is likely to reduce the capital requirements of large domestic insurers. Conversely, mediumsized and smaller domestic insurers are likely to face additional capital requirements.

8 UNDERSTANDING ORSA A GLOBAL RISK REGULATORY REGIME FOR INSURERS 8 SOUTH AFRICA The Financial Services Board will implement the Solvency Assessment and Management (SAM) ORSA in January The ORSA and Use Test Task Group believes that the secondary legislation under the SAM framework should not be too prescriptive, but should rather be set as high-level principles to which each insurer or insurance group must adhere in performing its ORSA. However, it has set out 22 guidelines. These include: The insurer should express its overall solvency needs in quantitative terms and complement the quantification by a qualitative description of risks. The ORSA and its outcome should be appropriately evidenced and internally documented. The assessment of overall solvency needs should be forward-looking. ORSA AROUND THE GLOBE When the IAIS published its ICPs, it did so without specifying an implementation period. In practice, different jurisdictions are implementing ORSA at different times. Organizations headquartered in a jurisdiction that is implementing ORSA will normally have to produce ORSA reports for their individual business units around the globe, which will, in turn, lead to a group-wide ORSA. This approach can vary by jurisdiction, so it is important to check what your local regulator requires. Furthermore, if your organization operates in more than one jurisdiction that is implementing ORSA, you will have to abide by the local regulator s ORSA requirements. It is important, therefore, to keep track of the various regulatory changes and requirements in different jurisdictions and to ensure that your organization is managing this significant regulatory change effectively. CONCLUSION Insurers and reinsurers must formulate an organization-wide view of the major problems of risk and illiquidity inherent within the industry. ORSA will help assess how risk will be measured by firms, as well as how decision-making should be approached, to ensure that firms are strategically aligning their risk appetites with their capital positions. The trends that have emerged from Europe have been felt worldwide. The ORSA and risk-based capital frameworks present a challenge to insurers. However, if managed effectively, they can prove beneficial to many insurers. They may eventually create a useful global common language for the insurance industry.

9 UNDERSTANDING ORSA A GLOBAL RISK REGULATORY REGIME FOR INSURERS 9 Jurisdiction Regulatory Body Framework Name Implementation Date Comments Australia Bermuda Canada China Australian Prudential Regulatory Authority (APRA) Bermuda Monetary Authority (BMA) The Office of the Superintendent of Financial Institutions Canada (OSFI) China Insurance Regulatory Commission (CIRC) Life and General Insurance Capital (LAGIC) s Internal Capital Adequacy Assessment Process (ICAAP) BMA Commercial Insurer s Solvency Self Assessment (CISSA) for insurers and Group Solvency Self- Assessment (GSSA) for groups. Guideline E-19: Own Risk and Solvency Assessment and amended Guideline A-4: Regulatory Capital and Internal Capital Targets for life insurers. The China Risk Oriented Solvency System (C-ROSS) Revised capital requirements for insurers were implemented on 1 January These standards are broadly equivalent to Solvency II. Both the CISSA and the GSSA came into effect at the end of The OSFI required all insurers to complete their first ORSA by the end of It is likely that there will be a transitional period in 2015 before full implementation in APRA s new capital requirements include an Internal Capital Adequacy Assessment Process (ICAAP), which is similar to ORSA. The first ICAAP reports were published after each company s year end date in They must be submitted to APRA annually. The ICAAP report must discuss how the company applied its ICAAP over the past year, state the current capital position, and forecast the capital position over the next three years. The CISSA and GSSA are Bermuda s version of ORSA, designed for the unique characteristics of that market while also being consistent with the IAIS framework. An insurer must document its ORSA in a report to the Board at least annually. Guidance is shaped by elements of existing OSFI guidance and processes, such as A-4, DCAT and stress testing. It is based on existing Canadian practice and not on Solvency II, although the regulator did consider international best practice. CIRC officially launched the China Risk Oriented Solvency System (C-ROSS) in March A conceptual framework was published in May 2013 and technical standards were developed in several working groups, followed by a quantitative impact study during the course of The objectives of the new regime are very similar to those which form the basis of Solvency II. These include creating a linkage between capital requirements and the risk profile of the undertaking, providing incentives to improve risk management, and making Chinese insurers more competitive.

10 UNDERSTANDING ORSA A GLOBAL RISK REGULATORY REGIME FOR INSURERS 10 Jurisdiction Regulatory Body Framework Name Implementation Date Comments European Union Guernsey European Insurance and Occupational Pensions Authority (EIOPA) Guernsey Financial Services Commission (GFSC) Solvency II ORSA The Insurance Business (Solvency) Rules 2015 The ORSA guidelines will become applicable on 1 January 2016, together with all other Solvency II rules. An interim framework, Guidelines on the Forward Looking Assessment of Own Risks (FLAOR), has been applicable from 1 January From 1 January 2015, undertakings representing at least 80% of a country s market share were mandated to perform an assessment of whether the undertaking was set to comply with the Solvency II regulatory capital requirements, and with the requirements laid out by the Solvency II technical provisions. The new solvency regime came into force on 1 May The Guidelines on the ORSA contain, in EIOPA s words, incentives to a better understanding of the undertaking s overall solvency needs and capital allocation as well as the interrelation between risk and capital management in a forward-looking perspective. EIOPA believes that binding national legislation does not necessarily have to be introduced in order to comply with the outcome specified in a guideline, but it may be necessary in certain cases, depending on the national legal framework. These Rules introduce requirements for a licensed insurer to perform an ORSA comprising: (a) the licensed insurer s own assessment and calculation of its solvency requirements (an Own Solvency Capital Assessment or OSCA); (b) the licensed insurer s assessment of risk management; and (c) the licensed insurer s assessment of the adequacy of capital resources to meet future capital requirements. Hong Kong Office of the Commissioner of Insurance (OCI) Risk-based capital (RBC) Framework Detailed rules will be developed throughout It will take another two or three years to amend legislation, following consultation. The framework will then gradually be implemented. The new RBC regime should be rolled out in phases with a sufficiently long run-in period, so that insurers will have adequate time to understand the requirements thoroughly and be able to achieve full compliance incrementally.

11 UNDERSTANDING ORSA A GLOBAL RISK REGULATORY REGIME FOR INSURERS 11 Jurisdiction Regulatory Body Framework Name Implementation Date Comments Hong Kong Japan Malaysia Office of the Commissioner of Insurance (OCI) Financial Services Agency Bank Negara Malaysia (BNM) Risk-based capital (RBC) Framework Self-Assessment of Risk and Solvency Guidelines on Internal Capital Adequacy Assessment Process (ICAAP) for Insurers Detailed rules will be developed throughout It will take another two or three years to amend legislation, following consultation. The framework will then gradually be implemented. The new RBC regime should be rolled out in phases with a sufficiently long run-in period, so that insurers will have adequate time to understand the requirements thoroughly and be able to achieve full compliance incrementally. The Insurance Authority in Hong Kong proposes group-wide ORSAs. It believes that capital requirements should address all relevant and material categories of risk. Insurers would be required to quantify the capital they need to hold for any risks not addressed by these risk categories through their ORSA. It also proposes ORSA assessments at least once a year, and additionally when there are significant changes to the risk profile of the insurer. 1 April 2015 From 1 April 2015, all insurance companies in Japan must start submitting formal annual ORSA reports to the Financial Services Agency. 1 September 2012 In 2009 the country s central bank, Bank Negara Malaysia, introduced risk-based capital requirements. In 2012, guidelines on ICAAPs were introduced, which included guidelines that outlined the risk based capital (RBC) framework that insurers must establish to manage capital adequacy. The guidelines took effect on 1 September Key elements of the risk-based capital framework include senior management oversight; comprehensive risk assessment; individual target capital levels; stress testing; sound capital management; and monitoring, reporting and review of ICAAP.

12 UNDERSTANDING ORSA A GLOBAL RISK REGULATORY REGIME FOR INSURERS 12 Jurisdiction Regulatory Body Framework Name Implementation Date Comments Singapore South Africa South Korea The Monetary Authority of Singapore (MAS) Financial Services Board (FSB) Financial Supervisory Service (FSS) MAS ORSA (MAS 126) Solvency Assessment and Management (SAM) ORSA Tier 1 insurers (with assets of SG$5 billion and above) must lodge an ORSA report annually with MAS. The first ORSA report was due by the end of For all other insurers, the first report is due on or before 31 December 2015, and every third year thereafter. ORSA is part of the MAS s Enterprise Risk Management framework (Insurance Risk Based Capital RBC2). ORSAs must take into account economic capital as well as MAS s regulatory capital requirements. MAS says an insurer should design its ORSA to encompass all reasonably foreseeable and relevant material risks including, as a minimum, insurance, credit, market, operational and liquidity risks and additional risks arising owing to membership of a group. 1 January 2016 SAM is based on Solvency II, but has been adapted in certain areas to take into account South Africa s specific conditions, risk profile and industry. The regulator says it has also considered regulations in Australia and Canada, as well as the IAIS s ICP framework. Position Paper 107, published in June 2014, sets out 22 guidelines for ORSAs. ORSA Expected to be 2017 Insurers will have to present an ORSA report to the FSS annually. The FSS ORSA guidelines and manual will be in line with ICP 16, but reflect the specific features of Korean insurers too. The official launch of ORSA reporting is expected to begin in 2017, based on data from the 2016 fiscal year.

13 UNDERSTANDING ORSA A GLOBAL RISK REGULATORY REGIME FOR INSURERS 13 Jurisdiction Regulatory Body Framework Name Implementation Date Comments Switzerland United States Swiss Financial Market Supervisory Authority (FINMA) National Association of Insurance Commissioners (NAIC) Regulation on the Supervision of Private Insurance Companies (Verordnung über die Beaufsichtigung von privaten) Versicherungsunternehmen) Risk Management and Own Risk Solvency Assessment Model Act (RMORSA) 1 July 2015 Switzerland s Federal Council has revised the Regulation on the Supervision of Private Insurance Companies, by amending rules for solvency, qualitative risk management and disclosure in line with Solvency II. Following this revision, in line with ORSA principles, insurance companies must assess the risks to which they are exposed, including significant concentrations of risk, their total capital requirements, and the adequacy and effectiveness of risk management. In states that have adopted ORSA, largeand medium-sized U.S. insurance groups and/or insurers are required to conduct an ORSA regularly, starting in By 1 April 2015 the following states had adopted ORSA: California, Connecticut, Delaware, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Nebraska, New Hampshire, New Jersey, New York, North Dakota, Ohio, Pennsylvania, Rhode Island, Tennessee, Utah, Virginia, Vermont, Wisconsin and Wyoming. The following were considering its adoption: Alabama, Alaska, Arkansas, Georgia, Kansas, Michigan, Missouri, Montana, Nevada, Oklahoma, Oregon, Texas and Washington. The remaining states had taken no action. An insurer that is subject to the ORSA requirements is expected to conduct an ORSA to assess the adequacy of its risk management framework, and current and projected future solvency position, on at least an annual basis. It must also internally document the process and results of the assessment, and provide a confidential high-level ORSA Summary Report annually to the state regulator.

14 UNDERSTANDING ORSA A GLOBAL RISK REGULATORY REGIME FOR INSURERS 14 RISK MANAGEMENT SOLUTIONS FROM THOMSON REUTERS Risk Management Solutions bring together trusted regulatory, customer and pricing data, intuitive software and expert insight and services an unrivaled combination in the industry that empowers professionals and enterprises to confidently anticipate and act on risks and make smarter decisions that accelerate business performance. For more information, contact your representative or visit us online at risk.thomsonreuters.com 2015 Thomson Reuters GRC03114/12-15