An internal assessment through which an insurer appraises its own risks and solvency needs beyond the regulatory formula.
ORSA, standing for Own Risk and Solvency Assessment, is the forward-looking, qualitative pillar of the Solvency II regime. Where the SCR imposes a standardized capital calculation at a given moment, ORSA requires each insurer to assess for itself all of its risks and its overall solvency needs, incorporating its strategy, its multi-year horizon and the risks poorly captured by the standard formula. It is an exercise in governance as much as in calculation, the responsibility for which lies with senior management and the board, not actuaries alone. ORSA relies heavily on stress tests and adverse scenarios, through which the insurer tests its solvency against economic, market or claims shocks, including scenarios no regulatory formula anticipates. It is precisely in this framework that emerging risks find their place, an insurer exposed to cyber being able to model a systemic accumulation scenario to check the resilience of its balance sheet. ORSA's strength is its ability to incorporate uncertainty and judgment where the standard formula reaches its limits; its potential weakness is its subjectivity, since the quality of the exercise depends entirely on the seriousness of the scenarios the firm chooses.
In its ORSA, a cyber insurer tests a scenario of simultaneous failure of two major cloud providers and finds that its solvency would fall below the comfortable threshold, prompting it to strengthen its reinsurance.
ORSA, évaluation interne des risques, own risk and solvency assessment