Turning ORSA into a Living Strategy

August 12, 2025

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Estimated Reading Time: 5 minutes

In today’s increasingly complex and regulated insurance landscape, the Own Risk and Solvency Assessment (ORSA) has emerged as far more than a regulatory requirement it is a cornerstone of sound risk management and strategic planning. When implemented meaningfully, ORSA becomes a living, forward-looking framework for understanding, managing, and communicating the risks insurers face.

Originally rooted in frameworks such as Solvency II in Europe and Risk-Based Capital (RBC) regimes elsewhere, ORSA requires insurers to evaluate their risk profile, solvency position, and capital adequacy under both current and stressed scenarios, all within a multi-year planning horizon. Its distinguishing feature is that it is company-specific and forward-looking, integrating business strategy, risk appetite, and capital planning into one cohesive process rather than relying solely on prescriptive regulatory formulas.

Done well, ORSA equips boards with a compass for navigating uncertainty, gives regulators confidence in governance, and aligns strategic ambitions with risk-taking capacity. Done poorly, it risks becoming an expensive, box-ticking exercise with little influence on decision-making.

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From Compliance to Strategic Value

The evolution of ORSA has been a shift from static, formula-driven solvency assessments toward a dynamic, enterprise-wide risk process. Across markets, actuaries and risk professionals are now expected to go beyond mechanical metrics and deliver tailored, forward-looking assessments that can withstand real-world pressures.[1]

However, this vision often falls short in practice. Stress testing may be carried out mechanically, governance committees may meet in form but not in substance, and risk insights may remain disconnected from day-to-day decision-making. As David Kirk observes, “Many ORSAs survive a 1-in-200 stress test and yet no one can say why that scenario was chosen or what management would do differently if it materialized.”

Common Weaknesses in ORSA Execution

Kirk’s audits of ORSA failures highlight recurring gaps:

Weak scenarios: Toothless or outdated tests lacking relevance or severity.

Emerging risks overlooked: Cyber, geopolitical shocks, and climate transition either ignored or oversimplified.

Reverse stress testing treated lightly: Missing the opportunity to explore existential threats.

Unrealistic management actions: Either assuming no intervention (overly conservative) or flawless intervention (unrealistic).

Capital model blind spots: Neglecting tiering, fungibility, or deferred tax effects.

Financial disconnects: Inconsistent or unexplained links between profit and NAV under stress.

In many emerging markets, the ORSA is still compiled annually by external consultants after a handful of interviews, submitted to regulators, and then shelved. In such cases, ORSA is perceived as a regulatory burden rather than a decision-making tool a lost opportunity.

Cultural and Organizational Barriers

Our experience shows that the Middle East and South Asia introducing ORSA can catalyze a shift from results-oriented to process-oriented thinking provided it is approached as an ongoing dialogue about risk and reward, not as a compliance report.[2]

Resistance often comes from entrenched silos and hierarchical structures:

No CRO at board level: Weakening the link between risk oversight and strategic direction.

Fragmented data access: Preventing a holistic risk view.

Consultant–management divide: Technical specialists emphasize model integrity; management seeks tangible, interpretable outputs.

Both perspectives are valid models must be complemented by grounded business insight. Communication gaps can derail progress, with management viewing actuaries as detached from market realities, and actuaries frustrated by weak risk culture. Here, Taleb’s concept of “skin in the game” is apt ORSA works best when all stakeholders are jointly accountable for its insights and implications.[3]

Making ORSA Work: Practical Recommendations

To unlock ORSA’s strategic potential, insurers should:

Refresh stress tests annually: Ensure scenarios are severe, relevant, and linked to business triggers, with qualitative justification for selection.

Elevate reverse stress testing: Define “failure” beyond capital breach to include strategic collapse or stakeholder confidence loss.[4]

Model key constraints explicitly: Deferred tax, capital tiering, and asset growth assumptions.

Communicate clearly to boards: Use dashboards, visualizations, and plain-language summaries to foster engagement.

Make it market-relevant: In non-mandated markets, link scenarios to local economic realities (e.g., oil price shocks for GCC economies) to gain buy-in.

Extend horizons: Five-year projections as a minimum, supplemented with qualitative trends over ten or more years, particularly for ESG, climate, and operational resilience risks.[5]

Move beyond annual cycles: Adopt real-time or event-driven updates during material change events.

Conclusion:

ORSA as a Living Process

The ultimate test of ORSA’s value is simple: Would decision-makers act differently because of it?
If the answer is “no,” the process needs rethinking. If “yes,” then ORSA has achieved its intended purpose to be a strategic enabler in uncertain times. When embedded into the fabric of governance and planning, ORSA is not a static report but a living process that aligns risk, capital, and strategy. In a volatile world, that alignment is not just regulatory best practice it is a competitive advantage.

What’s the biggest challenge your organisation faces in making ORSA truly strategic?

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