By Vivek Syal, Director, PwC
But, is it just about ‘ticking a box’ for you and your Board? Some of you reading this will possibly say ‘yes’ at this stage for a variety of reasons, but the ORSA has the opportunity to go much further.
Starting with the regulatory aspects makes perfect sense as:
a) If you haven’t already done so, you are required to submit an ORSA to the PRA this year; and
b) You must be able to demonstrate that you, as a minimum, are able to measure your readiness for the forthcoming regime when it comes into force less than 18 months from now.
With the ORSA specifically however, I have always felt that UK insurers started in great shape with the ICAS regime which went some way to tying together risk and capital explicitly in a regular reporting cycle. So the question has never really been about whether the ORSA was a step change for the industry, the question has been and continues to be what value you are able to extract from it?
A good friend and I discussed recently that a good indicator of whether your ORSA is really working is whether your underwriters are actively engaged in the entirety of the ORSA process when they develop/analyse their business plans or design new products to target market opportunities. Equally, are COOs considering major operational changes in the context of the ORSA process or as something entirely separate altogether? Bridging the gaps between core business processes such as strategy, business planning, capital and risk management, business change, and financial reporting provides a tangible opportunity for your organisation to improve and make informed business decisions whilst simultaneously meeting regulatory requirements.
Many insurers would have developed an ORSA Report and iterated it several times already, but a far fewer number are taking real advantage of what the ORSA process has to offer the Board in how they view the business both today and prospectively. Whether or not you agree with each and every aspect of the Solvency II framework and its underlying requirements, the ORSA process is a real opportunity to shape how key areas of the Directive will work for you, in your own way whilst at the same time ensuring you aren’t falling short of your regulatory obligations.
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