NAIC Completes Own Risk and Solvency Assessment Pilot Project; Florida ORSA Legislation Expected for 2016

Above:  Colodny Fass’ Claude Mueller Notes the NAIC’s Conclusion of its ORSA Pilot Project; Florida ORSA Legislation Expected

 

Florida is among a growing minority of states that have yet to implement the National Association of Insurance Commissioners’ (“NAIC’s”) Risk Management and Own Risk and Solvency Assessment Model Act (#505) as of mid-June 2015.  Enacting Own Risk and Solvency Assessment (“ORSA”) legislation is expected to be a Florida Office of Insurance Regulation priority for 2016.

While large insurers and groups in states requiring an ORSA will have to conduct one, not every insurer will have to do so.  Very few Florida domestic insurers would be subject to the requirement.

Meanwhile, the NAIC has proceeded and recently concluded its ORSA Feedback Pilot Project, which entailed a three-part series of voluntary ORSA Summary Report submissions for confidential regulatory review.   The resulting high-level feedback has been relayed to the insurance industry prior to the first ORSA report filing that will be required in most states by the end of 2015. 

With oversight from the NAIC’s Group Solvency Issues Working Group, the third and final phase of the ORSA Pilot Project took place from October 2014 through June 2015 with 28 participating insurers/groups.

The NAIC noted that the depth and breadth of the Pilot Reports’ content varied significantly from company to company, even within the same industry segment, and was reflective of the maturity of the underlying enterprise risk management and capital management frameworks in place.  The reports of life insurers generally demonstrated more mature frameworks than the other segments of the industry, namely property and casualty and health, the NAIC explained.

To access the Working Group’s observations published during mid-July 2015, click here.

In addition to changes to NAIC Model # 440 and NAIC Model #450 relating to insurance holding company supervision, U.S. insurance regulators are currently implementing the international concept of the ORSA.   U.S. insurers (or their holding company group) that are subject to the requirements will complete a self-assessment of their risk management, stress tests and capital adequacy on a yearly basis.

Through ORSA, U.S. regulators are expected to be able to add to their existing assessment of group capital with analysis of the company’s own assessment of group capital needs. 

In September 2012, the NAIC also adopted the Risk Management and Own Risk and Solvency Assessment.  The Model Law sets out the legal framework for requiring a risk management framework and the filing of the summary report.

 

 

Should you have any questions or comments, please contact Claude Mueller at cmueller@ColodnyFass.com or +1 850 701 3112.

 

 

 

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