Beginning in 2015, U.S. insurers operating within the member jurisdictions of the National Association of Insurance Commissioners (NAIC) will be mandated to file an Own Risk and Solvency Assessment (ORSA) Summary Report. ORSA will apply to any individual U.S. insurer that writes more than US$500 million of annual direct written and assumed premiums, and/or insurance groups that collectively write more than US$1 billion of annual direct written and assumed premiums. These thresholds apply to premiums written domestically as well as internationally. Certain states have opted to state that OR-SA will be a requirement regardless of premium volume.
The first ORSA filings will serve to represent that a strong enterprise risk management (ERM) function has now become a fundamental regulatory expectation.
For insurers, their first ORSA filing is likely to be a substantial hurdle, even for firms that already have established ERM frameworks. On the upside, the self-assessment of their ERM practices that will be required prior to filing an ORSA will help insurers identify potential areas for improvement, not only in their existing ERM program, but in the way they manage risk in day-to-day operations. It will likely hasten efforts already under way to enhance and/or develop formal risk governance programs.