NAIC ORSA implementation subgroup adopts regulator best practices

Authored by: Phil Talerico

The National Association of Insurance Commissioner’s (NAIC) Own Risk and Solvency Assessment (ORSA) implementation subgroup recently completed a project which resulted in identifying and documenting best practices for use in sharing ORSA-related information among state regulators. Insurers have expressed concerns over maintaining confidentiality of ORSA information from the outset of the NAIC’s deliberations regarding ORSA regulations in 2011 and prior.

The best practices are aimed at maintaining the confidentiality of a company’s ORSA report during the course of coordinating with other states in connection with conducting financial analysis and financial examinations. The subgroup discussed regulator experiences in receiving and reviewing ORSA summary reports from individual insurers, including best practices in documenting the lead state review and in providing feedback to the insurer. In general, the best practices guidance emphasizes that other states should defer to the lead state’s analysis and examination of a company’s ORSA report.

The following is a summary of the best practices adopted by the subgroup:  

  • The lead state should encourage sharing of the lead state’s analysis of the ORSA as opposed to sharing the full ORSA summary report with other regulators, whether requested during a coordinated exam or for an analysis of a holding company subsidiary
    • The lead state may supply the full ORSA summary report if required by other regulators, however, the providing state should verify that the receiving state has adopted the confidentiality provisions of the ORSA model act
    • Coordinated examinations are discouraged from including the full ORSA summary report or substantial sections within the exam file
  • When providing the ORSA summary report to the NAIC, or to a third party consultant working on behalf of the lead state, the providing state should:
    • Ensure written confidentiality agreements are executed between the state and the third party
    • Obtain written consent from the insurer before providing third party access to the ORSA report
    • Encourage reliance on the lead state’s review of the ORSA report
  • The regulator analysis of the ORSA summary report is the state insurance department’s own work product and subject to the existing department policies for providing access to confidential information

The ORSA implementation subgroup recommended to the NAIC Financial Examiners Handbook Technical Group that reference to these best practices should be included in the Financial Condition Examiners Handbook.

The following is a link to the ORSA implementation subgroup’s best practices guidance:

Download best practices guidance >

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