ORSA in Gibraltar – Meeting the bar

ORSA in Gibraltar – Meeting the bar

Many of Gibraltar's insurers, alone or with the aid of Risk Consultancies like KPMG, will be approaching the concluding phase of their Own Risk and Solvency Assessments (ORSAs).


Senior Manager, Consulting

KPMG in Gibraltar


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Many of Gibraltar's insurers, alone or with the aid of Risk Consultancies like KPMG, will be approaching the concluding phase of their Own Risk and Solvency Assessments (ORSAs). OSRA is a new process and reporting obligation under recently enacted Solvency II regulation. It raises the expectations of executive and non-executive directors' strategic knowledge and their demonstrable participation in risk and capital planning.

ORSA requirements oblige each insurance company to;

  • Continuously assess its risk profile;
  • Assess its capital adequacy from both a regulatory and internal perspective;
  • Manage its risks and capital within a Board-approved appetite;
  • Use a time horizon in that assessment which matches their business planning period, rather than something more arbitrary, such as "over the next 12 months"; and,
  • Report the ORSA to the Board and the GFSC at least annually, as well as re-perform one following a significant change in a firm’s risk profile or business plans

Gibraltar, like most EU member states, have expected firms to have performed dry-run ORSAs over the last couple of years in preparation. The GFSC's recently published feedback on 2015's efforts was candid and pragmatic, highlighting areas where most, if not all firms were considered to be behind the curve, and proposing suitable remedial action.

This included topics such as:

  • Lack of evidence of Board participation - suggestive that ORSA Reports are largely written independent of directors.
  • Coverage of risks - use of standardised risk categories in quantifying the ORSA, rather than firm-specific assessments.
  • Stress and scenario testing - "arbitrarily derived" stress and scenario tests, with assumptions used not clearly set out.
  • Assessing the appropriateness of standard formula capital requirements – a lack of granularity in firms’ assessments of whether the off-the-shelf “standard formula” is a reasonable fit to their real-world risk profiles.
  • ORSA Report Structure – acknowledging that some firms, in the absence of a formal report template, have struggled to deliver a useful end product to allow a reader to understand both the process and its conclusions.

It is stressed that insurer’s ORSA processes will feed into the GFSC’s supervisory approach from now on, with the ORSA Report as an invaluable source of material for enabling the regulator to deliver on its statutory objectives. Therefore, the emphasis on demonstrating and evidencing executive and non-executive engagement, rather than simply producing and filing a report for compliance purposes, cannot be overstated.

GFSC expectations of this year’s ORSA efforts have therefore been signposted – can the industry meet, or even beat the bar?


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