In September 2012, the NAIC adopted the Risk Management and Own Risk and Solvency Assessment (RMORSA) Model Act. The model requires among other things that insurers writing more than $500 million in premium, or part of a group writing more than $1 billion in premium, must submit an annual Own Risk and Solvency Assessment (ORSA) Summary Report to the lead state of the group.
The ORSA concept was imported from the International Association of Insurance Supervisors (IAIS) through a review by the Solvency Modernization Initiative (E) Task Force. This review recognized the increasingly important role of enterprise risk management (ERM). The ORSA Summary Report provides a description of the ERM system, identifies the major risks of the group in current and stressed environments, explains how the group’s capital model is constructed to account for these risks in current and stressed environments, and considers prospective risks. This new information has the potential to be very powerful in aiding solvency reviews and early detection of concerns. However, outside of a more detailed look at internal controls and more general risk management techniques, many of the elements of risk management and capital management discussed within these reports are relatively new to most regulators. In addition, these reports differ widely from one group to the next as do the practices used by different groups.
For this reason, a national training program is needed to prepare states for the review and utilization of these reports in the regulatory process. One of the primary purposes of the training will be to provide regulators with the wide range of different practices and techniques used by groups and how each can be used by the applicable group to reduce the insolvency risk to the group. The training will also be used to emphasize and demonstrate how risk management is used in the strategic process of groups, and the importance of understanding how the group approaches its unique risks. Finally, the training will emphasize the need for analysts, examiners and actuaries to work together as a team in reviewing the ORSA summary report and to use critical thinking in approaching the review. Consequently, this training is intended to be very dynamic in both its approach and content.
The training will cover all three sections of the ORSA:
Section I- Description of the Insurers’ Risk Management Framework
Section II- Insurer’s Assessment of Risk Exposure
Section III- Group Risk Capital and Prospective Solvency Assessment
The focus, however, will be on the first two sessions.
It is intended to use actual ORSAs that have been submitted to the state in the training class.
The NAIC has developed a confidentiality agreement between NAIC and the DOI to protect the company data.
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