October 10, 2014

Actuarial skills and professionalism add value to insurers’ ORSA reports

WASHINGTON– A paper from the American Academy of Actuaries, ‘Actuaries and Own Risk and Solvency Assessment (ORSA),’ explores some of the insights that ORSA reports, a relatively new form of internal risk self-assessment required of insurers, can provide into insurance companies’ and groups’ financial stresses and their ability to withstand them.

Actuarial analysis, commonly applied in examining issues such as insurance solvency, insurance oversight, and enterprise risk management (ERM), can add value to ORSA reports, which are required by the National Association of Insurance Commissioners (NAIC) through model law and guidance.  “While current regulatory guidance on ORSA does not prescribe an actuarial role, the unique skills of the actuarial profession will be invaluable to the ORSA report and protecting insurer solvency,” says Patricia Matson, chairperson of the ORSA Subgroup of the Academy ERM Committee and one of the drafters of the paper.

 “The American Academy of Actuaries’ ORSA Subgroup developed this paper to provide an overview of the key content in each section of an ORSA and outline components of an ORSA for which actuarial input may be particularly useful,” the paper notes. The sections of the NAIC ORSA Guidance Manual are:

• ORSA Section 1 — Description of the Insurer’s Risk Management Framework.

• ORSA Section 2 — Insurer’s Assessment of Risk Exposures. 

• ORSA Section 3 — Group Assessment of Risk Capital and Prospective Solvency Assessment.

“The U.S. actuarial profession is working to ensure that in addition to the numbers needed for an ORSA, we also can adequately capture their meaning for today and tomorrow,” the paper concludes.

View and download the paper from “Risk Management and Financial Reporting” under the public policy section of the Academy’s website, www.actuary.org.