Monday, 10 June 2013

Institute of Risk Management's latest on ORSA - presentations and surveys

I haven't kept too much of an eye on the IRM's Solvency II Special Interest Group activity, which during 2011/12 was prolific, but with the disappearance of the finishing line, I suspected there may have been some fall off. There has certainly been a Partidge-esque rebadging of it (now called 'ERM in Insurance'), which I suspect helps most attendees justify to their bosses, in the face of interminable Solvency II delays, taking half a day off to attend these shindigs!
Rebadged - IRM's Solvency II SIG

A recent one on the incorporation of ORSA into the business planning process is worth highlighting, being focused (at least on the face of it) on the more visceral elements of the ORSA process rather than the theory. While the Kiln CRO seemingly had more to say than was put on his slides, the Allianz UK Head of Op Risk noted a few things which those working in the field would benefit from benchmarking against;

  • Risk department seemingly responsible for ORSA report production
  • 'Record of ORSA Process' documentation - shooting for around 60 pages, which feels light to me as a "record" (about par for a "report" perhaps?)
  • ORSA Board report - summarised from the 60 pages referenced above, so again light
  • Lists some 'example' ORSA triggers, which are good for peer comparison
  • Seemingly will be validating their ORSA process, despite it not being a regulatory requirement.

The IRM's related survey also produced some notable material, particularly around participation levels - only 14 participants, compared to 22 back in 2011 and 33 this time last year, showing perhaps the extent of the fatigue on the matter. With the tiny sample also heavy in GI firms, one might take any revelations with a pinch of salt, however, I spotted;

  • Frequency - A quarter are planning to run the ORSA process quarterly, most going annually
  • Preparedness - Areas such as data quality, ORSA validation, ORSA record keeping and the forward-looking assessment are all lagging
  • Projection length - 80% going for 3 years, though the GI heaviness of the sample will have skewed this for sure
  • Projection technique - around half doing future years in isolation, and half doing multi-year (dependent) projections
  • Forward looking assessment - All respondents are factoring in expected risk profile changes into their FLAs
  • Stress & Scenario Testing - All respondents using scenarios with interdependencies, while two are not using reverse stress testing at all.

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