Beyond the Box-Tick: Making Independent ORSA Reviews Count

Aah, the ORSA – this is (surely) a world of pure actuarial joy. Imagine all that risk analyses in a real-world context. And there is more: this is where the planet of risks meets the universe of opportunities. As an actuary, you can give meaningful input into strategy: shaping sound business decisions and, hopefully, enhancing value for your client.

In practice, of course, things are rarely that straightforward. But let’s hold on to the ideal – where the ORSA is run as intended – and explore how an independent review can add real value.

The ideal: when the ORSA works well

The ORSA process is designed to enhance risk assessment and governance. It takes effort, but if done well, the insurance company’s board and management are equipped to address the core risks. Not only can they consider potential impacts, but expected risk outcomes and related management decisions are quantified, giving decision-makers a clear view of the implications of their options.

And it gets better: each year the picture evolves. Some risks recede, others appear on the horizon, bringing new information to the table and business decisions to be refined.

Where does the independent review fit into this? When structured to support the ORSA process, it can add significant value by assessing risks and related opportunities through a different lens.

For the current ORSA cycle, the review can inform by pointing to alternatives and providing additional metrics for decision-makers to consider. Critically, the review input should complement, rather than detract from, the core message.

A further benefit of an independent review is that it can identify potential refinements for the future. In the context of an evolving risk landscape, this can help (for example) put other scenarios on the table for the next ORSA cycle, enhancing the ORSA process year on year. Indeed, a good independent reviewer builds institutional knowledge across successive cycles, making the review an input into the continuous improvement loop rather than a once-off exercise. Whether to retain the same reviewer across cycles – for continuity – is itself a useful scoping consideration.

The reality: when the ORSA falls short

Sadly, ORSAs are not always performed as they should be. These instances are not too difficult to identify: typically, they struggle to pass the use test (i.e., the requirement that the ORSA be genuinely embedded in decision-making, rather than produced as a compliance exercise).

An independent review can add even more value to boards and management teams in such instances. By clearly highlighting weaknesses, the ORSA process can be redirected – perhaps not within the current cycle, but certainly from the following cycle onwards.

How the message is delivered matters. Ideally, the independent reviewer should “work with” all stakeholders – emphasising the benefits that will result from proposed changes rather than simply cataloguing shortcomings.

Getting the scope right

Suitable scoping of the independent review is important, as the regulatory guidance is not prescriptive – it just requires that an independent review be conducted and leaves the scope largely to the parties involved.

A scope that is too narrow risks reducing the independent review to a tick-box exercise. In the ORSA context, this benefits no one.

When the scope becomes too wide, it may result in a “redo” exercise. This is both costly and counterproductive, as it shifts focus away from what truly matters:  constructive input on risk metrics and actionable suggestions for future refinement.

With the scope calibrated correctly, the independent review can – and should – add significant value, whether the ORSA is strong or whether it needs improvement. It brings a fresh perspective to the current cycle, points the way to future enhancements, and gives the board the assurance it needs that the ORSA is a genuine risk management tool rather than a compliance artefact. That, to an actuary, is where the real satisfaction lies.