An ORSA will require insurers to analyze all reasonably foreseeable and relevant material risks (i.e., underwriting, credit, market, operational, liquidity risks, etc.) that could have an impact on an insurer’s ability to meet its policyholder obligations.
The “O” in ORSA represents the insurer’s “own” assessment of their current and future risks. Insurers and/or insurance groups will be required to articulate their own judgment about risk management and the adequacy of their capital position. This is meant to encourage management to anticipate potential capital needs and to take action before it’s too late. ORSA is not a one-off exercise—it is a continuous evolving process and should be a component of an insurer’s enterprise risk-management (ERM) framework. Moreover, there is no mechanical way of conducting an ORSA; how to conduct the ORSA is left to each insurer to decide, and actual results and contents of an ORSA report will vary from company to company. The output will be a set of documents that demonstrate the results of management’s self-assessment."
ORSA is one of the Insurance Core Principles set by the International Association of Insurance Supervisors ("IAIS") and it forms part of the insurance regulatory framework in Europe and a number of other countries around the world. Bringing one of IAIS's Insurance Core Principles, in the form of ORSA, into the state-based regulatory regime can be seen as a proactive step by the NAIC to strengthen the state-based system, but it is also indicative of the ongoing globalization of insurance regulatory standards.