OSFI ORSA Flashcards
What is the purpose of ORSA?
- Understanding of the inter-relationships between insurer’s risk profile and capital needs
- Consider all reasonably foreseeable and relevant material risks, be forward-looking, and congruent with an insurer’s business and strategic planning
List key elements of ORSA
- Comprehensive identification and assessment of risks
- Relating risk to capital
- Board oversight and SM responsibility
- Monitoring and reporting
- Internal controls and objective review
Provide components of ORSA key element:
Relating risk to capital
- Nature, scale and complexity
- Determine own company needs
- Set internal targets
- Integration with other business processes
List countervailing measures and actions that could be taken by an insurer to improve its solvency position
- Raising additional capital
- Slowing or ceasing new business
- Entering into Re arrangements
- Implementing changes to product pricing and/or changes to business mix
An insurer should conduct regular reviews of its ORSA process for integrity, accuracy and reasonableness. Provide 9 areas that should be reviewed
- Reasonableness of overall ORSA results
- Consistency with risk limits and risk appetite
- Documentation that supports the ORSA
- Process to identify risks information
- Assessment process, given nature, scale, complexity
- Completeness of quantitative data inputs
- Reasonableness of meth, distr and measure adequacy
- Effectiveness of info systems supporting ORSA
- Linkage of ORSA process with risk management, strategic, business and capital planning
Provide exposures in which risk concentration, dependencies and interactions can arise
- Extremely severe events/scenarios
- Many small events/scenarios
- Common cause across many UW years (asbestos)
- Geographical regions
- Connection between Re
Discuss ORSA key element:
Comprehensive Identification and Assessment of Risks
- ORSA should define and assess the materiality of all known foreseeable, emerging and other relevant risks that may have an impact on insurer’s ability to continue operations in both normal and stressed situations
- Should include underlying assumptions, processes and key considerations in assessing, measuring and mitigants in place for each risk
Discuss ORSA key element:
Relating Risk to Capital
(Nature, scale and complexity)
- Insurer should use more sophisticated methods to estimate the amount of own capital needed for complex risks
- For less material, less complex risks, difficult to quantify, opt for simpler analysis
Discuss ORSA key element:
Relating Risk to Capital
(Determining Own Capital Needs)
- Determine for each risks the amount of capital that should be held and how results should be aggregated
- Insurers are expected to consider publications and professionals
Discuss ORSA key element:
Relating Risk to Capital
(Setting Internal Targets)
- Once capital needs has been determined, insurer should asses if it is appropriate with 3rd party capital expectations (including OSFI)
- Can include stress test, DCAT, respect minimal and supervisory capital requirements
Discuss ORSA key element:
Relating Risk to Capital
(Integration with Other Business Processes)
- Assess capital for business strategy and dev plans
- Insurer should ensure Internal target are consistent with risk and business profile, short and long-term run goals
- Capital needs for changes in risks, anticipated growth, acquisitions
Discuss ORSA key element:
Board Oversight and Senior Management Responsibility
Board is responsible for:
• Overseeing ORSA and should review the reasonableness and appropriateness of results
• Seek assurance from SM that are consistent with Board’s down decisions and business and risk strategy
• Internal controls are sound and implemented in an effective manner
SM should :
• Review the appropriateness of the methods
• Makes sure risk management fits with board-approved risk appetite and limits
Discuss ORSA key element:
Monitoring and Reporting
ORSA should be reported to the board at least annually. More often if change in risk profile or appetite. SM should receive regular reports to
• Evaluate material risks and their potential effects
• Evaluate assumptions
• Determine if capital is sufficient
• Evaluate adequacy of stress test
• Assess future capital needs
Discuss ORSA key element:
Internal Controls and Objective Review
Insurer should review ORSA for integrity, accuracy and reasonableness. Area to review:
• Comprehensiveness and appropriateness of assessment process
• Governance mechanism
• Process for risks identifications
• Methodologies
