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🛡️ '''Own risk and solvency assessment (ORSA)''' is a regulatory framework that requires [[Definition:Insurance carrier | insurance companies]] to conduct a comprehensive, ongoing evaluation of their material risks and determine whether their current and projected [[Definition:Capital adequacy | capital]] positions are sufficient to support those risks under both normal and stressed conditions. Originating from the [[Definition:International Association of Insurance Supervisors (IAIS) | International Association of Insurance Supervisors]] and embedded in regimes such as [[Definition:Solvency II | Solvency II]] in Europe and the [[Definition:National Association of Insurance Commissioners (NAIC) | NAIC]] framework in the United States, ORSA represents a shift from purely formulaic capital requirements toward a culture of enterprise-wide [[Definition:Risk management | risk management]] driven by each insurer's own analysis of its unique risk profile.

📝 The process typically involves the insurer's [[Definition:Chief risk officer (CRO) | chief risk officer]] and senior leadership identifying all material risks — [[Definition:Underwriting risk | underwriting]], [[Definition:Credit risk | credit]], [[Definition:Market risk | market]], [[Definition:Operational risk | operational]], and [[Definition:Liquidity risk | liquidity]] risks among them — then quantifying how those risks interact and impact the company's [[Definition:Solvency | solvency]] under a range of scenarios. Stress tests and [[Definition:Scenario analysis | scenario analyses]] simulate adverse events such as a major [[Definition:Catastrophe | catastrophe]], a financial market downturn, or a spike in [[Definition:Claims reserve | claims reserves]]. The insurer documents its findings in a formal ORSA report, which is submitted to the relevant [[Definition:Insurance regulator | regulator]] and reviewed by the [[Definition:Board of directors | board of directors]]. Importantly, ORSA is not a one-time exercise; it must be refreshed regularly and revisited whenever the company's risk profile changes materially — after a large acquisition, for example, or entry into a new line of business.

📊 ORSA's true value extends well beyond satisfying regulators. Carriers that embrace the process as a genuine management tool — rather than a compliance checkbox — gain sharper visibility into the interplay between their [[Definition:Investment portfolio | investment portfolio]], [[Definition:Reinsurance | reinsurance]] program, and [[Definition:Underwriting | underwriting]] appetite. This insight informs strategic decisions about which risks to retain, which to cede, and how much capital to hold in reserve. For smaller and mid-size insurers, ORSA can be particularly revealing, exposing concentration risks or [[Definition:Tail risk | tail exposures]] that standard regulatory formulas might not capture. Regulators, in turn, use ORSA submissions to benchmark companies against peers and to identify emerging vulnerabilities before they threaten [[Definition:Policyholder | policyholder]] protection.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Solvency II]]
* [[Definition:Enterprise risk management (ERM)]]
* [[Definition:Capital adequacy]]
* [[Definition:Stress testing]]
* [[Definition:Risk-based capital (RBC)]]
* [[Definition:National Association of Insurance Commissioners (NAIC)]]
{{Div col end}}

Definition:Own risk and solvency assessment (ORSA) - Revision history

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