In a growing list of insurance industry challenges (see Navigating the insurance battleground for a refresher), increased regulations rank right up there. While the Solvency II Directive may be subject to delay, some countries in the European Union have signaled a willingness to accelerate the Own Risk and Solvency Assessment (ORSA). Regulatory pressures are not just affecting insurers in the European Union. The United States, Bermuda, Japan, China and Switzerland are all considering the introduction of requirements similar to that of the ORSA. For insurers globally, this means one of two things. They can see regulations as static requirements—or treat them as opportunities.
ORSA should be viewed as an opportunity to integrate a number of existing considerations, activities, tools and outcomes to help make improved strategic decisions. Getting to this stage requires a shift because:
- Premium growth and financial profitability will no longer be modeled in isolation from supporting capital and solvency requirements.
- Capital management and solvency will be considered in the context of setting strategy and defining a business plan.
- Once growth, profitability and capital have been understood, the output should not be seen as static deterministic output—rather risk and volatility should be evaluated in terms of the potential impact on growth, profitability and capital objectives.
Integrated planning for improved strategic decisions
Accenture’s integrated planning approach involves combining business planning with the ORSA. It requires the alignment of strategy, business and financial planning, capital management, risk and capital modeling, solvency assessment, and stress and scenario testing.
An integrated plan can help the board and management make better strategic decisions—but insurers will first need to establish alignment. Join me next week, when I delve into the five distinct and related sections of an integrated plan and how traditionally siloed functions can come together in pursuit of shared objectives.
To learn more in the meantime, download Integrating Risk and Capital Management into Strategy and Planning (PDF; opens in a new window).