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Own Risk and Solvency Assessment (ORSA)
Updated on:
July 19, 2023

Own Risk and Solvency Assessment (ORSA)

ORSA is a forward-looking, risk management and capital assessment framework that enables financial services organisations to evaluate their own risk exposure and solvency requirements under various scenarios.

  • ORSA is a self-assessment of an organisation's risk management and capital adequacy.
  • It provides insights into an organisation's risk appetite, risk exposures, and solvency position.
  • ORSA is mandatory for insurers under Solvency II regulation and is considered best practice for other financial services organisations.
  • The assessment is a continuous process that supports effective decision-making and strategic planning.

About FullCircl

FullCircl is a Customer Lifecycle Intelligence (CLI) platform that helps B2B companies in financially regulated industries do better business, faster. Its solutions allow front and middle office teams to win the right customers, accelerate onboarding and keep them for life.

FullCircl has merged with ID&V platform provider W2 Global Data to provide regulated entities with the next generation of regulatory compliance.

Own Risk and Solvency Assessment (ORSA) is a vital component of the risk management process for financial services organisations, particularly within the insurance sector. It enables firms to identify, measure, and manage risks in a proactive manner, ensuring they maintain an appropriate level of capital to cover their risk exposures. By conducting an ORSA, organisations can better understand their risk appetite and risk tolerance, leading to more informed strategic decisions and improved overall risk management practices.

Under the Solvency II regulatory framework, insurance companies are required to perform an ORSA on a regular basis. This assessment ensures that insurers have adequate financial resources to meet their obligations to policyholders and other stakeholders. Although the ORSA process is primarily focused on the insurance industry, other financial services providers can also benefit from implementing an ORSA-like approach to risk management and capital assessment.

The ORSA process typically involves three key elements: identification of risk exposures, assessment of solvency requirements, and stress testing under various scenarios. The organisation must consider its risk profile and its ability to meet regulatory capital requirements in both normal and adverse conditions. By examining the potential impact of various stress scenarios on the organisation's solvency position, management can identify vulnerabilities, assess capital adequacy, and take appropriate measures to mitigate risks.

In summary, the Own Risk and Solvency Assessment (ORSA) is an essential tool for insurance organisations and other financial institutions to evaluate their risk exposure and capital needs. By implementing a robust ORSA process, firms can enhance their risk management capabilities, ensure regulatory compliance, and make more informed strategic decisions, ultimately leading to increased resilience and long-term success in the competitive financial services landscape.

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