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🛡️ '''Own Risk and Solvency Assessment''' is a regulatory requirement and enterprise-level process through which an [[Definition:Insurer|insurer]] or [[Definition:Insurance group|insurance group]] evaluates the adequacy of its [[Definition:Risk management|risk management]] framework and current and projected [[Definition:Solvency|solvency]] position in light of its own risk profile and business strategy. ORSA emerged as a cornerstone of modern, risk-based [[Definition:Insurance supervision|insurance supervision]], reflecting a shift away from purely formulaic [[Definition:Capital adequacy|capital requirements]] toward a regime in which companies must demonstrate that they understand their risks and can sustain their obligations under a range of scenarios — including adverse ones. The concept is embedded in major regulatory frameworks worldwide: [[Definition:Solvency II|Solvency II]] in the European Union (where it forms a key part of Pillar 2), the [[Definition:International Association of Insurance Supervisors|IAIS]] [[Definition:Insurance Core Principles|Insurance Core Principles]] and [[Definition:ComFrame|ComFrame]], the U.S. [[Definition:National Association of Insurance Commissioners|NAIC]] framework (adopted through state-level legislation), and analogous requirements in jurisdictions such as Japan, Singapore, Hong Kong, and Australia.

📝 Conducting an ORSA requires the insurer to go well beyond standard regulatory capital calculations. The process involves identifying and quantifying all material risks — [[Definition:Underwriting risk|underwriting]], [[Definition:Market risk|market]], [[Definition:Credit risk|credit]], [[Definition:Operational risk|operational]], [[Definition:Liquidity risk|liquidity]], and increasingly [[Definition:Climate risk|climate-related]] risks — and then stress-testing the company's capital position against forward-looking scenarios that reflect the insurer's specific exposures and strategic plans. The assessment must consider the company's own view of the capital needed to support its business, which may differ from the regulatory minimum. A written ORSA report is typically produced at least annually and shared with the [[Definition:Board of directors|board of directors]] and supervisory authorities. Crucially, the ORSA is not a one-off compliance exercise; regulators expect it to be integrated into strategic decision-making, influencing [[Definition:Capital management|capital allocation]], [[Definition:Reinsurance|reinsurance]] purchasing, product development, and investment strategy.

🔑 What distinguishes ORSA from earlier solvency assessments is its emphasis on proportionality and self-awareness. A small mono-line insurer and a large [[Definition:Internationally active insurance group|internationally active insurance group]] will produce very different ORSAs, because the process is designed to be tailored to the organization's complexity and risk profile rather than applied as a one-size-fits-all template. For supervisors, reviewing ORSAs provides a window into how well an insurer's management and board truly understand the risks on their books and whether the company's [[Definition:Enterprise risk management|enterprise risk management]] capabilities are genuine or merely cosmetic. For insurers themselves, a well-executed ORSA can become a powerful internal discipline — forcing leadership teams to confront uncomfortable questions about concentration risk, scenario severity, and strategic resilience before regulators or market events force those conversations.

'''Related concepts:'''
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* [[Definition:Solvency II]]
* [[Definition:Enterprise risk management]]
* [[Definition:Capital adequacy]]
* [[Definition:Stress testing]]
* [[Definition:Insurance Core Principles]]
* [[Definition:Internationally active insurance group]]
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Definition:Own Risk and Solvency Assessment - Revision history

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