As a result of the Pilot, further changes may be made to the Guidance Manual itself within the next six months. A second Pilot Program may be conducted in 2013, under enhancements to the Manual. The NAIC also expects to update the Manual periodically going forward, as submissions are made and additional areas for clarification are revealed. Some current points which may require clarification include:

More guidance around capital allocation calculations could be given. Some of the pilot companies did not have their risk-based capital allocation strategy or methodologies clearly documented. For those that did have a calculation, methodologies varied significantly in confidence and time horizons for estimation. While companies are free to choose their own modeling techniques, more documentation around the methodology and assumptions used might be beneficial.
Better documentation may be required for certain foundational assumptions and explanation of company-specific terms used in the report. For example, companies will be requested to specify method of accounting they are using, GAPP, STAT, etc. Information relating to subsidiaries and affiliates should be clarified, with organizational charts and internal company abbreviations were found to be extremely helpful. The review team appreciated any efforts to provide glossary-type exhibits of terms and acronyms.
Insurers considered most prepared provided certain financial information proactively that may be incorporated into future manual guidance. For example, several leading companies showed year-to-year trends in financial results over several years, adding a new dimension to the review. Also, helpful liquidity discussions were noted by at least two companies.
In the future, companies may be asked to better describe how risk management is tied to executive and management compensation. As ERM practices are integrated into company operations and strategic decision-making, risk management may become a significant component of executive compensation and an indicator that the company is giving attention to the issue "from the top down."

As additional developments, companies with a parent in the European Union that file an ORSA report with a foreign regulator can expect that it will be accepted in the U.S. if and to the extent it covers U.S. operations. However, no foreign regulators have decided to accept a U.S. ORSA format yet, and the NAIC discussions on equivalency status continue.

Special Reports /

ORSA Feedback Pilot Project Lands with Little Turbulence

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