OSFI.ORSA

Question 1

What does ORSA stand for?

Answer 1

Own Risk & Solvency Assessment

Question 2

What is the general goal of ORSA?

Answer 2

Enhance insurers’ understanding of the relationship between risk profile and capital needs

Question 3

Does OSFI approve an insurer’s ORSA?

Answer 3

NO, but OSFI will REVIEW a company’s ORSA as part of its assessment of the company

Question 4

What is the relationship between ERM (Enterprise Risk Management) & ORSA?

Answer 4

ERM and ORSA should be WELL-INTEGRATED so that the analysis and its results are consistent between them.

Question 5

Identify the ORSA's 5 key elements.

Answer 5

1. RISK identification & assessment
2. RELATE risk to capital
3. Oversight
4. MONITORING & REPORTING
5. INTERNAL controls & OBJECTIVE review

Question 6

Briefly describe the ORSA key element 'risk identification & assessment'.

Answer 6

Identify all material risks, including emerging, foreseeable, and non-quantifiable risks

Question 7

Briefly describe the ORSA key element 'relating risk to capital'.

Answer 7

Internal Targets should be set to reflect the insurer’s risk profiles, regarding its scope and nature of operations.

Question 8

Briefly describe the ORSA key element ' oversight'.

Answer 8

• BoD to review and discuss OSRA, should understand the decisions and plans undertaken by Sr Management
• Sr Management to have a good understanding of the nature of risks , risk mitigants, capital adequacy

Question 9

Briefly describe the ORSA key element 'Monitoring & Reporting'.

Answer 9

Annual reports ( or more often if risk profiles changs) to Board of Directors & Sr Management on risk profile & capital assessment.

Question 10

Briefly describe the ORSA key element 'Internal control & Objective review'.

Answer 10

• Controls: Ensure accuracy, integrity, reasonableness
• Independent Review: Conducted by auditors or external experts not involved in ORSA execution.

Question 11

Is the ORSA process the same for all federal insurers?

Answer 11

YES and NO:
- 5 key elements are the same (list them)
BUT
- specifics differ by company depending on risk profile & NSC (Nature/Scale/Complexity) of operations

Question 12

Should ORSA be used to set ICT (Internal Capital Target)?

Answer 12

YES:
An important part of ORSA is to set ICT since ICT considers insurer-specific risks

Question 13

Is cyber risk accounted for in the MCT calculation? Briefly explain whether it should be considered in the company’s internal capital target.

Answer 13

MCT
- not specifically part of MCT
ORSA
- should be considered in setting ICT (Internal Capital Target)
- product is sold through a mobile app

Question 14

Is interest rate risk accounted for in the MCT calculation? Briefly explain whether it should be considered in the company’s internal capital target.

Answer 14

MCT
- part of market risk within MCT
ORSA
- should be considered in setting ICT (Internal Capital Target)
- government bonds are subject to fluctuations in interest rate

Question 15

What is the relative importance of quantitative and qualitative aspects of ORSA?

Answer 15

Quantitative & qualitative aspects are equally important

Question 16

Identify 3 possible approaches to calculating ICT (Internal Capital Target) .

Answer 16

1. COMPLEX INTERNAL MODEL: for complex risks
2. SIMPLE MODEL: with conservative assumptions
3. QUALITATIVE: includes expert judgment for difficult-to-quantify risks

Question 17

Identify 3 similarities between FCT & ORSA.

Answer 17

• both are concerned with risk identification & control
• both are concerned with capital available versus capital required
• both are submitted to BoD & regulators

Question 18

Identify 3 differences between FCT & ORSA.

Answer 18

1. GUIDELINES:
   FCT: uses CIA SOPs (Statement of Principles)
   ORSA: uses OSFI guidelines
2. METHODS:
   FCT: quantitative only
   ORSA: qualitative & quantitative
3. REPORT:
   FCT: by AA (Appointed Actuary)
   ORSA: management responsibility

Question 19

Identify 4 advantages of ORSA over MCT.

Answer 19

ORSA:
|1] includes ALL material risks
|2] uses stress-testing to set ICT(Internal Capital Target)
|3] qualitative (as well as quantitative)
|4] admits assessment of internal controls
MCT: doesn’t do these things