Friday, 3 June 2011

Institute of Risk Management - June presentations on ORSA

First week of the month can mean only one thing - IRM Solvency II Special Interest Group had their themed presentations, and in a very timely manner, it is ORSA month!

Two elements were of particular interest. The first was this presentation which contains some excellent slides towards the back which demonstrate reconciliation of "Own Capital" with its SCR starting point, as well as analysis of change and projected solvency ratios in a range of scenarios. This kind of material will be very familiar to actuaries (and indeed anyone who has read through a financial condition report), and thankfully the world of risk management is making this ORSA/FCR linkage explicit.

Additionally, the IRM have also ponied up with another of their surveys, this time on ORSA progress (22 respondents). They summarise in the final slide, but regardless, I found the following noteworthy;

  • No one as yet claimed to be fully ORSA operational, and two had not started preparations
  • Almost three quarters have been working on ORSA process for 6 months or less
  • Risk function overwhelmingly leading the development
  • Very low involvement of Internal Audit and Compliance in the process - this despite them being cited as potential "external validators"
  • Around a quarter have started from scratch, with 70% using existing processes (I suspect ICA, FCR etc)
  • Around half only have their exec involved at a high level, if at all, at the moment - a couple claim their exec have taken active ownership of the ORSA process
  • Seemingly it is the risk committee that is the main recipient of pilot versions
  • Lack of resource or guidance on style proving to be challenging to respondents
  • Half have provided no training or communications to date on ORSA
  • Two respondents though guidance to date has been sufficient, the rest were ambivalent or thought it insufficient.
Good work again from the Institute, and plenty of food for thought.


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