Understanding ORSA - a global regulatory regime for insurers

Often insurance firms were not considered to be exposed to the same degree of risk as banks, or to pose any systemic risk to the financial system. In many jurisdictions there were no specific requirements to have ERM in place, or to report on it to supervisors.

However, the financial crisis showed us that the business modelling of insurance firms had shortcomings, and that a failure to fully assess insurance firms’ exposure to risk and capital adequacy, especially in times of financial duress, could be dangerous. When undertaken, the assessments on whether firms had sufficient capital to maintain their risk profiles were more backward-looking than forward-looking and did not sufficiently take into account “unknown unknowns”.