ORSA in the United States: Series

Background and Current Status: Part 2 of 3

Written by Jane C. Taylor, FCAS, MAAA, JD & Ronald T. “Rusty” Kuehn, FCAS, MAAA, CERA, CPCU, ARM, FCA with Carolyn Dintino

In or Out – When is an Insurer Exempt from ORSA?

According to the NAIC Own Risk and Solvency Assessment (ORSA) Guidance Manual, all insurers are subject to the ORSA requirements unless the insurer meets certain conditions:

1. The individual insurer’s annual direct written and assumed premium is less than $500,000,000; and,
2. The insurance group’s annual direct written and assumed premium is less than $1,000,000,000.

If an insurer fulfills exemption requirement (a) but not (b), then the insurance group may supply the ORSA Summary report in any combination as long as every insurance entity within the group is covered by the summations of the ORSA Summary Report.

If an insurance group fulfills exemption requirement (b) but not (a), then only the entity that is over the threshold is required to produce an ORSA Summary Report.

Note that these are the initial conditions for the implementation of ORSA. The premium levels for participation in ORSA may be adjusted downward in subsequent years.

The Score – What are ORSA Goals?

The NAIC Own Risk and Solvency Assessment (ORSA) Guidance Manual sets forth what the NAIC hopes to accomplish with the implementation of ORSA:

1. To make sure all insurers have an effective level of enterprise risk management, through which each insurer’s material and relevant risks are identified using techniques that are appropriate to the nature, scale and complexity of the insurer’s risks, in a manner that is adequate to support risk and capital decisions; and
2. To provide supplement to the existing legal entity view of group-level perspective on risk and capital.

Stay tuned for Part 3 of 3: What are its Components?

Questions or concerns regarding ORSA? Contact a Huggins Actuary for assistance.