Role played by the Own Risk and Solvency Assessment (ORSA)
Own risk and solvency assessment includes the various processes and guiding and directing decision making and strategic analysis in an organisation. It is aimed at assessing continuously and prospectively, the general solvency requirements according to a risk profile associated with an insurance firm. It is a process conducted internally by an insurer to determine the reliability and viability of its risk management and current and future solvency needs under normal and extended stress occasions. An analysis of reasonably predictable and relevant material risks such as underwriting, credit, market, operational and liquidity risks that could affect the insurer’s ability to meet its policy holder agreements already underwritten is required from insurers. As the term “Own” in ORSA suggests, an insurance organisation does the assessment of its current and prospective risks. This prepares the management to anticipate probable capital needs that can arise and a suitable action to be taken to provide for the needs efficiently.
ORSA is the main component in capital management strategy of an organisation. This can be backed up by the three main components that ORSA accomplishes. First it is responsible for determining the risks an insurer faces in its operations. These risks are mainly financial risks highlighted earlier. By determining the risks that are faced, the insurer can put in place measures and directives to alleviate or deal conclusively with them. Another important factor to consider is that ORSA determines the amount of capital to protect a firm against such risks. This is in event where actually the risks are inevitable. Therefore financial resources, have to be put sought so that in case of such occurrence, the risks are taken care of be the predetermined capital and they do not cripple any operations