PINS 2.4.1 What is ORSA?

(1) Own risk and solvency assessment (ORSA) is a detailed forward-looking examination of:
(a) the adequacy of an insurer's risk management policies, procedures and controls; and
(b) the insurer's present and future solvency positions.
(2) The objectives of ORSA are:
(a) to assess:
(i) whether the insurer's own view of its solvency position is adequate given its risk profile and risk tolerance; and
(ii) whether its solvency position is likely to remain adequate in the foreseeable future;
(b) to show how the insurer proposes to manage (through capital buffers and other risk-mitigation mechanisms) the material risks to which it is exposed; and
(c) to identify potential business vulnerabilities.
Note 1 Because ORSA is part of an insurer's risk management strategy, the insurer must have regard to the other factors included in that strategy, including risk profile, tolerance and exposures, when conducting ORSA. For the same reason, the requirements that apply to risk management strategy (such as approval in r 2.2.2) also apply to ORSA.

Note 2 ORSA is both a management tool for the insurer's governing body and a supervisory tool to warn the Regulatory Authority of solvency issues.
(3) In conducting ORSA, the insurer must have regard to:
(a) its overall solvency needs, including its own view of the adequacy of its capital resources to meet the regulatory capital requirements;
(b) the actions it has taken to manage the risks to which it is exposed;
(c) the financial resources needed:
(i) to manage its business prudently; and
(ii) to meet the regulatory capital requirements;
(d) the nature and quality of the capital resources needed, having regard to their loss-absorbing capacity and liquidity;
(e) the effect on the insurer's solvency position of all reasonably foreseeable and relevant changes in its risk profile (including group-specific risks); and
(f) its ability to meet its minimum capital requirement and continue in business, and the financial resources needed, over periods longer than those typically used for calculating the regulatory capital requirements.
Example

To gauge its ability to continue its business over longer periods, the insurer may use multi-year capital, cash-flow and balance sheet projections
(4) The insurer must include as part of any quantitative evaluation in ORSA:
(a) stress tests;
(b) the occurrence of extreme events to which the insurer is exposed; and
(c) other unlikely but possible adverse scenarios that would render the insurer's business model unviable.
Amended by QFCRA RM/2013-1 (as from 1st January 2015).