Thursday, 5 April 2012

EIOPA's IRSG feedback on ORSA Consultation

EIOPA's Insurance and Reinsurance Stakeholder Group (IRSG) have had their feedback published on EIOPA's website this week, to go alongside a ream of other feedback documents. While the lobbyists papers will be of varying levels of relevance, the IRSG's will surely carry some weight when it comes to the final Level 3 advice (though surprisingly, the committee make up appears to be shockingly Franco-German, which may explain some of the idiosyncracies in the feedback text!).

On top of the seemingly industry-wide interchangeability of ORSA/the ORSA as a process and a report, I picked out the following worthy points;
  • Note that "mixing [ORSA] with regulatory requirements will dilute the value and overall effectiveness,,,"
  • Nicely highlight that the MCR "is the only requirement to be met at all times", and that the L3 should reflect that
  • "An undertaking's business strategy will feed into the ORSA in terms of establishing the parameters for assessment" - really like this sentence, and is a handy line for Board training/briefing.
  • "ORSA Reports are prepared for the AMSB and subsequently shared with the supervisor" - again, good distinction from the consultation draft, which points towards potential dual-ORSA reporting
  • Stange piece at bottom of p4, whiuch almost suggests that standard formula users would be in "unknown territory" with regard to following the existing L3 text, and should benefit from simplifications - if any L3 territory is "unknown" to SF users, I suggest they get themselves a consultant!
  • Good point on p5 regarding cross-pollenation of risk terminology between regulation and corporate law at European level. The CEA glossary of Solvency II terms is recommended as the best place to source/store these definitions, which should smart a little for the risk profession as a whole.
  • IRSG desire to restrict the amount of work required to breakdown in detail the emergence of risk over an undertaking's business planning period.
  • Recommend at least one scenario should be included in ORSA which shows an SCR breach for the benefit of management.
They don't stray too far away from the individual lobbyists with their thoughts, but the consensus on a single report for management and supervisor from all parties should at least lighten the administrative load, as I suspect that will be taken on board.

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