EIOPA Recommends Further Improvements in Implementation of ORSA
EIOPA published a supervisory statement that outlines the first supervisory experiences on how the European (re)insurance companies have implemented the Own Risk and Solvency Assessment (ORSA) process. This statement is based on the supervisory assessments of ORSA under the Solvency II framework and it utilizes the information collected by the national supervisory authorities in the European Economic Area, after Solvency II implementation in 2016.
The analysis shows that the majority of (re)insurance companies made good progress in implementing the ORSA process; however, further improvements are needed according to EIOPA. Analysis indicates that Board members must play a more active role in the ORSA process. It also indicates the over-reliance of insurers on the standard formula with regard to risk management. Therefore, to properly determine the overall solvency needs of companies, EIOPA stressed the importance of thoroughly assessing any significant deviations in risk profiles of companies from the standard formula. The quality of stress test scenarios used in the ORSA process needs to be further improved and the risk assessment needs to cover the impact of all potential risks. Gabriel Bernardino, Chairman of EIOPA, said, "This forward-looking own risk and solvency assessment is crucial to protect European consumers and ensure financial stability in Europe.”
Related Link: Supervisory Assessment of ORSA (PDF)
Keywords: EIOPA, Europe, ORSA, Solvency II, Insurance
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