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14 | The South African Insurance Industry Survey 2016
2017 ORSA requirements –– Guideline 10: the assessment of continuous Category Considerations
Additional requirements for 2017 cover areas compliance with the regulatory capital
such as Board challenging and signing off on requirements should include, at least, an Risk We considered the robustness of the risk
assumptions and methodology, out of cycle ORSAs assessment of potential future changes in the management management process and how it is linked to the
and independent reviews. The full list of additional risk profile under stressed situations; the quantity system ORSA together with the roles and responsibilities
requirements is set out below: and quality of its own funds as well as the of the Board and Senior Management.
composition and changes of own funds across Link to business
–– Paragraph 1.27 and 1.28: Board and senior tiers over the business planning period. plan / strategy* We explored how well the ORSA process was
management are expected to: integrated with the business planning and strategy
–– Guideline 11: the actuarial function should Risk appetite and setting processes.
–– challenge the assumptions behind the provide input concerning the continuous risk tolerance
calculation of the SCR to ensure they are compliance with requirements on the calculation We examined the spectrum of risk appetite and risk
appropriate with regards to the insurer's of technical provisions and the risks arising from Material risk tolerance statements and how these interlinked.
risks; and this calculation. assessment
(qualitative and We analysed the spectrum of risks, both qualitative
–– use the insights gained from the ORSA –– Guideline 14: the insurer should perform the quantitative) and quantitative, which insurers (groups) consider
process to approve long and short term ORSA at least annually and should perform a to be material to the business.
capital planning. non-regular ORSA if the risk profile changes Assessment
significantly. The insurer should justify the of solvency We looked at how and over what time horizon
–– Paragraph 1.33: independent assessment should adequacy of the frequency of the assessment (solvency needs insurers (groups) assessed own solvency position
include an assessment of the ORSA process and and demonstrate that the ORSA is embedded in and capital and needs together with which metrics were being
whether the ORSA policy has been complied the business and used in strategic decisions. projections) used.
with.
South Africa benchmarking Stress testing We examined the type of stress and scenario tests
–– Paragraph 1.34 h) and m): the ORSA report For many insurers, the 2015 mock ORSA cycle and scenario performed by insurers and the robustness
should document the following respectively: would have been the first or second cycle. For the analysis of underlying assumptions and knock-on effects.
largest insurance groups in South Africa, 2015 was
–– Deviations between the insurer’s risk profile the third or fourth iteration of the ORSA. Our view Use in decision Where available, we considered how the ORSA
and the SCR assumptions as well as how the is that most of the largest groups already have making* output was used in business decisions.
insurer has reacted or will react to significant well developed ORSAs. However, on average the
deviations. industry’s ORSAs are still being developed. Out-of-cycle Where available, we explored which common
ORSA* triggers would initiate an out of cycle ORSA and
–– The findings of the independent review of the KPMG in South Africa has analysed over 15 mock how well defined these triggers were.
ORSA, together with the Board and Senior ORSA reports in the market, covering both life and Documentation
Management’s responses to these findings. non-life insurance entities and groups of various We explored the overall quality of the ORSA reports
size and complexity. Though this represents only Group-wide and identified good practices.
–– Paragraph 1.54: an insurer is expected to a small portion of the insurance market in South coverage
demonstrate the appropriateness of the standard Africa, we believe that it is across a representative Where applicable, we considered the extent of
formula for the risks inherent in its business and sample of the South African market and therefore coverage of both regulated and non-regulated
its risk profile. the conclusions drawn should be reasonably entities within the group, the emergence of risk
representative of the industry on average. from these entities and how the solvency needs
–– Paragraph 1.55: submitted and approved SCR were aggregated at group level.
undertaking-specific parameters have to be the
same as those used in the overall solvency needs
assessment.
*Not a requirement for the 2015 mock ORSA.
