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16 | The South African Insurance Industry Survey 2016
Below, we outline some of the leading and lagging practices observed:
Observed leading practices from KPMG benchmarking Observed lagging practices from KPMG benchmarking While some of the leading practices
across themes are highlighted, it
ORSA is an integral part of business strategy and planning. ORSA process is clearly disjoint from strategy setting and the is important to note that no single
business planning process. company was a leader across all the
Risk appetite and tolerance statements are expressed in assessment criteria, likewise, no single
terms of at least both Capital and Earnings Volatility and Risk appetite and risk tolerance limits only cover capital targets set company was lagging across all the
these are cascaded down to relevant sub-risks. Some only at company level with the solvency target not being justified in assessment criteria.
attempt is made to set tolerance levels for material terms of the risk profile. Some still measure the target in terms of
qualitative risks. current statutory capital measures. Feedback from the Regulators
SAM is principles based, so a firm
Material risk assessments cover both quantitative risks not Material risk assessment is limited to quantitative risks covered by needs to consider how to meet
included in the standard formula - such as liquidity risk - as the standard formula. compliance in a way that best works
well as qualitative assessments with a clear description of for the firm to achieve business value.
control measures in place for each material risk identified. Stress and scenario testing is limited to a historic point in time Our view is that for most companies,
- usually the chosen valuation date. No consideration is given to the focus of the first mock ORSA
Stress and scenario tests are well articulated and cover the reverse stress testing. report was to design and implement
business planning projection period. Better ORSAs also underlying processes and produce
consider knock-on effects in addition to the stress/scenario There is no evidence of the ORSA being used in decision-making, documentation to comply with the
test. which is to be expected where the mock ORSA was the result of applicable requirements. They should
the first ORSA cycle. be used as a lessons learnt cycle by
ORSA projections are evidenced in business decisions, for individual companies to improve future
example in the dividend setting strategy. ORSA results are The need for and possible circumstances for performing an out-of- cycles. Particular attention should
used in an assessment of future capital needs and as an cycle ORSA is not covered in the ORSA report. be given with respect to ensuring
input to capital planning. ownership, engagement and challenge
The process for identification, assessment, and prioritisation as from Senior Management and the
Clear articulation of when an out-of-cycle ORSA would be well as monitoring and reporting of risks is theoretically described, Board so that they clearly understand
required. sometime as a future state. and can affect their obligations once
SAM is live.
Included an executive summary which covered business Documentation is either not clear, accurate or complete.
planning, strategy setting and key results of the ORSA Conclusions reached are not justified and can therefore not be
assessments. challenged at Board level.
The risk management system and how the ORSA process Group-wide coverage does not focus appropriately on risks
fits in the overall ERM framework is summarised. Roles emerging from group exposures. ORSAs generally do not
and responsibilities for the various steps in the process are sufficiently consider risks associated with non-regulated entities.
clearly outlined.
