Most European insurers and reinsurers have made solid progress regarding the implementation of the Own Risk and Solvency Assessment (ORSA), but the European Insurance and Occupational Pensions Authority (EIOPA) has called for further improvements.
A supervisory statement released by the EIOPA explores the implementation of ORSA under Europe’s Solvency II framework, and highlights areas for improvement despite good progress being made by the majority of re/insurers.
Under Article 45 of the Solvency II Directive, every re/insurance undertaking throughout Europe must complete its own ORSA.
“EIOPA welcomes the progress of (re)insurance companies in the implementation of the ORSA process. At the same time EIOPA calls for further improvements, which are needed for a better integration of this essential risk management tool into the companies’ business strategy. This forward-looking own risk and solvency assessment is crucial to protect European consumers and ensure financial stability in Europe,” said Gabriel Bernardino, Chairman of the EIOPA.
Areas for improvement suggested by the EIOPA includes the ORSA process being inclusive of the involvement of key functions, the greater involvement of the administrative, management or supervisory bodies (AMSB) and embedding ORSA results within strategic management decisions, risk assessment for all material risks, the standard formula and ORSA, and also the quality of stress testing.