19 June 2017

EIOPA calls for further improvement in the ORSA implementation

The European Insurance and Occupational Pensions Authority (EIOPA) published a supervisory statement outlining the first supervisory experiences on how European (re)insurance companies have implemented the ORSA process.

This statement is based on the supervisory assessments of the ORSA under the Solvency II framework conducted by the national supervisory authorities.  

The analysis shows that the majority of (re)insurance companies made good progress in implementing the ORSA process. Despite this positive progress, EIOPA sees the need for further improvements. In particular, the involvement of the administrative, management or supervisory bodies in the ORSA to a greater degree is needed. Board members have to play a more active role in the ORSA process and to take into account more evidently this important risk assessment in their strategic decisionmaking processes. 

Furthermore, EIOPA’s analysis indicates the over-reliance of insurers on the standard formula with regard to risk management. EIOPA therefore stresses the importance of assessing thoroughly significant deviations of the companies’ risk profiles from the standard formula to properly determine their overall solvency needs. Particular attention should also be paid to the quality of stress test scenarios used in the ORSA process, including the use of reverse stress testing, and to the scope of the risk assessment, which requires further improvement to cover the impact of all potential risks.  

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