Insurance regulators in the U.S. have begun signing up withtheir international peers to push a new ERM regulation called“ORSA”—Own Risk and Solvency Assessment, says Dave Ingram,executive vice president of Willis Re.
|With ORSA, “you look at your own risk and decide how muchsurplus you need to protect your solvency, how much capital youneed for your risk,” Ingram says.
|This is turning the tables on insurers, many of which relycompletely on either rating agencies or regulators to determine howmuch capital they should have, Ingram explains.
|“This regulation is saying that board and management need tohave their own opinion, not just a pulled-out-of-the-air opinion,”he says.
|One of the things ORSA wants to hear, Ingram adds, is how themanagement and board reflect the risk management of the firm intheir thinking about the amount of capital needed, “with thepresumption that if you have no risk management, then you need alot more capital.”
|Banking regulators also have put something similar in place, hesays.
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