As the deadline for U.S. insurers to be compliant with the National Association of Insurance Commissioners (NAIC) Own Risk and Solvency Assessment (ORSA) regulation quickly approaches, Plante Moran continues to receive many questions from our clients. We address the most frequently asked questions below:
Do I need to comply?
It depends. If you write premiums that are worth more than $500 million, or belong to a group of insurers that collectively writes more than one billion dollars, or you an insurer writing more than $376 million, which is quickly growing (a rate of 10 percent over a three-year period), then the answer is probably yes. However, it is ultimately up to your regulator(s). Insurers may apply for a waiver, and commissioners may request compliance from those otherwise exempt.
What do I need to do to get ready?
It depends. Companies with well-established Enterprise Risk Management (ERM) programs are well on their way. In addition to establishing an effective ERM framework, an ORSA is intended to provide a group level perspective on risk and capital. The best ERM programs already provide such perspectives. For smaller insurers, establishing a basic ERM program is often the starting point.
How is compliance achieved?
Internally, the insurer should have documentation of its ERM and solvency assessments. The insurer should summarize information about its risks and solvency position.
What do I need to file?
The regulator may request a confidential high-level summary report annually.
When do I need to file?
According to the NAIC website, insurers will be required to regularly conduct an ORSA beginning on January 1, 2015. However, less than half of States have enacted legislature to require an ORSA. Some industry insiders expect it may take a couple of years before most states adopt the NAIC model law on ORSA. Also, no specific filing date was included within the ORSA regulation, however, an ORSA Summary Report should be prepared once per year beginning in 2015 if the insurer has exceeded the threshold to comply with the requirements of the regulation.
There are many variables in compliance with the ORSA Model Act. The biggest piece of advice is to keep close communication with your regulators. Plante Moran will continue to monitor developments with ORSA and provide updates to the industry. Contact us for help with ORSA, ERM, or other NAIC model laws and acts.