An NAIC task force has approved and sent to a higher committee the manual that will be used to implement the proposed Own Risk and Solvency Assessment (ORSA) requirement for insurance holding companies.
Actual implementation of the ORSA manual won’t be sooner than an effective date of Jan. 1, 2014, if not later, because critical issues remain.
This includes the industry assertion that regulators perhaps lack the legal authority to implement the ORSA requirement.
The Solvency Modernization Initiative Task Force approved the vote by voice then referred it to the Financial Condition Committee for further action.
The decision was made Saturday at the NAIC’s fall meeting at the Gaylord National Harbor beyond the Beltway of Washington.
“ORSA Is critical,” said Pennsylvania Deputy Insurance Commissioner Steve Johnson to fellow SMI regulators and interested parties at the meeting.
“The one thing I like that the international people are doing is ORSA. I think we can show leadership with ORSA; that we took the lead,” Johnson said, after delivering a diatribe against international regulatory initiatives like ComFrame, a “400-page document” developed by the International Association of Insurance Supervisors in Basel, and other aspects of Solvency 2, the European Union insurer solvency and risk management standards framework. ORSA is a group supervision requirement of Solvency 2.
“A lot of us our working on very limited budgets at the state insurance departments, but looking at ComFrame (//www.iaisweb.org/__temp/IAIS_initiates_development_of_ComFrame.pdf), if you just had one internationally active company in your state-, even one, there would be no resources in my department to do it under the current draft,” Johnson complained, noting he couldn’t even hire people he would need. “There are implementation risks on many of these [international] items,“ Johnson warned.
The industry had supported the manual after winning changes in it, but was concerned about the appropriateness of the implementation method proposed by NAIC staff.
No one is running to ORSA with open arms among the industry.
The American Council of Life Insurers believes that the NAIC’s development of ORSA is moving in a positive direction, “as evidenced by the approval of the ORSA Guidance Manual by the NAIC Solvency Modernization Initiative Task Force,the proposed ORSA Pilot Project, and recognition that the ORSA will continue to evolve over time, “the association stated.