ORSA – The Value of an External Review

An independent ORSA[1] review is not merely a regulatory checkbox exercise. Done well, it is one of the most effective tools available for assessing the integrity of the ORSA process, from the governance framework down to the underlying calculations.

ORSA Reviews and Internal Expertise

The SAM[2] governance standards require that an ORSA review be conducted by a party independent of the ORSA process. The reviewer does not need to be external to the insurer. Often, internal expertise is used to perform the independent review.

However, internal teams are often deeply involved in developing and maintaining the ORSA. While this expertise is invaluable, familiarity can make it difficult to identify weaknesses or inefficiencies in established processes. Over time, methodologies, assumptions, and controls may evolve incrementally without a formal reassessment of whether they remain appropriate, effective, and aligned with the insurer’s current risk profile.

The External Review Route

This is where an external independent reviewer can add significant value.

At Insight Life Solutions (ILS), we bring a fresh perspective to the ORSA process. Having worked with a range of insurers and risk management frameworks, we can benchmark an insurer’s ORSA process against broader industry practice, while remaining focused on the insurer’s specific business characteristics.

One of the key benefits of an independent review is the ability to trace the ORSA process from the documented methodology through to the underlying calculations and results. In our experience, seemingly minor inconsistencies between what is documented and what is ultimately used in the calculations are not uncommon.

For example, the assumptions described in the ORSA report may not always be fully aligned with those used in the underlying calculations. Differences in inputs, such as yield curves or equity symmetric adjustments, may appear minor. However, they can add up and may have a meaningful impact on solvency projections, stress-testing outcomes, and the conclusions presented to management and the board.

An ORSA is only as reliable as the consistency between its documentation, assumptions, calculations, and conclusions. If the assumptions used in the calculations differ from those communicated in the ORSA report, decision-makers may unknowingly rely on results that do not accurately reflect the intended scope and methodology. Given that ORSA outcomes often inform strategic decisions, risk appetite considerations, capital management actions, and business planning, such discrepancies can have consequences far beyond a simple documentation error.

Scoping an External ORSA Review

At first glance, an external review may seem costly. However, the internal cost of allocating employees’ time to the review is often overlooked or underestimated.

Clearly defining the scope of the external review can also help contain costs. When appropriately scoped, an external review can:

• Assess whether the ORSA process aligns with the governance standards set out by the Prudential Authority, as well as the insurer’s approved ORSA policy.
• Evaluate the governance framework supporting the ORSA, including roles, responsibilities, and board oversight.
• Review methodologies, assumptions, and stress-testing approaches for consistency and appropriateness.
• Verify that documented assumptions, data sources and methodologies are correctly reflected in the underlying calculations and models.
• Identify areas where processes may have become overly complex, inefficient or reliant on historical practices.
• Highlight potential gaps, weaknesses or emerging risks that may not be visible to those closely involved in the day-to-day processes.
• Provide independent assurance to the board that the ORSA process remains robust, effective and fit for purpose.

In Conclusion 

An external reviewer offers greater levels of independence and objectivity, reducing the potential influence of internal bias. This allows them to challenge assumptions objectively and ask questions that internal stakeholders may no longer be considering, particularly when processes have been operating unchanged for several years.

Drawing on industry expertise gained from reviews across a range of insurers, an external reviewer can also bring practical insights to help avoid pitfalls, manage regulatory expectations, and identify opportunities for improvement that may not be apparent from within.

At ILS, we aim to provide reviews that are independent, practical and constructive.  This not only enhances confidence in the ORSA process, but it also helps boards and management teams make decisions grounded in reliable, consistent, and well-governed information.

If you are interested in finding out more about our services, please contact us at lifesolutions@insight.co.za.

[1] ORSA = Own Risk and Solvency Assessment

[2] SAM = Solvency Assessment and Management