Solvency II: Own Risk & Solvency Assessment

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Solvency II: Own Risk & Solvency Assessment
ORSA: why it is important
Our credentials
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PwC has actively contributed to shaping industry understanding of the requirements of the
ORSA, including delivering Board level training, providing thought leadership publications
and delivering industry briefings. PwC Malta has dedicated resources specialising in
Solvency II matters and also benefits from access to the PwC network, as appropriate.
•
•
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Firms have to do it – it is a regulatory requirement, and momentum is building.
But EIOPA’s consultation on Level 3 guidelines is principle based and doesn’t give
prescriptive guidance.
Insurers have made huge investments in Solvency II, and ORSA is a way in which they
can unlock value from that investment. As the interface between the Board and the
firm’s risk management and capital model, the ORSA should be used to vastly improve
quality and timeliness of management information (MI).
ORSA spans Pillars 1, 2 and 3 of Solvency II programmes and can ensure alignment if
done properly.
Global dimension – Regulators and supervisors of some 190 jurisdictions have agreed
that ORSA principles are something they aspire to.
How can we help you?
The appropriate support will to some extent depend upon the progress you have made in
the development of your ORSA.
Health check
One-off exercise to compare your progress against the SII requirements and evolving
market practice, providing recommendations and a clear path of how to address gaps.
Training
Facilitate training sessions/ workshops for
key senior stakeholders.
External resource
PwC resource to work alongside
the client’s team to support ORSA
implementation.
Implementation support
Targeted external advice to support you in a number of areas including:
• Development/ enhancement of ORSA documents e.g. policy, outputs
• Articulation of risk appetites, including link with strategy and setting of limits
• Using your model effectively to support performance, risk and capital outputs,
include forward looking projections
• Development of a robust stress and scenario testing framework
• Development of Management Information Pack
Key contacts
If you would like to discuss how we can support you, please contact:
Romina Soler
[email protected]
+356 2564 7112
Marvic O’Dwyer
[email protected]
+356 2564 7228
Solvency II: Own Risk & Solvency Assessment
The purpose of the ORSA process is to enable management to:
• understand and manage the company’s risks (and associated controls) and capital
against appetite; and
• make informed strategic decisions that impact the firm’s risk profile.
PwC’s view of the ORSA
External Stakeholders
It is a bespoke process for management to:
• refine business planning and strategy;
• define its capital needs;
• continuously monitor regulatory capital; and
• have a joined up view of risk profile, risk tolerance limits and business strategy.
The Board
Business strategy (medium term)
Business planning (short term)
It is a process not just a report.
ion
cis
De
nt
me
De
na
Ma
s
ion
Risk profile post controls
Our budget (short term, usually 1
year) - targeted return
Our business planning
(medium term, e.g. 3
years)
cis
ge
nt
me
• Risk profile vs.
apetite/tolerance
• Expected return
vs. target
MI
ge
Risk Reward Profile
What kind of company we
are, what businesses we do
and why (long term)
na
MI
Ma
s
Example of Board decisions
The ORSA moves Solvency II from compliance burden into business benefit
What early warning signs
exist re profit shortfall
(you could call these
KRIs)?
Capital
• Economic (overall
solvency needs)
• Regulatory
What is our available
capital - economic /
SCR / MCR?
What tolerance is there around
targeted return - at various levels
of granularity (you could call this
risk appetite) / how unpalatable
are various levels of profit
shortfall (you could call this risk
tolerance?)
How do we manage the
risk of profit shortfall
(you could call these
constraints)?
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