The National Association of Insurance Commissioners (NAIC) launched its Solvency Modernization Initiative (SMI) in June 2008, undertaking a comprehensive self-examination of the U.S. insurance regulatory framework in the context of evolving international solvency standards and regulatory regimes. As one component of SMI, the NAIC is moving forward with a process similar to the Own Risk and Solvency Assessment (ORSA) under the European Union’s Solvency II directive, a requirement designed to give regulators the capability to examine and evaluate the strength of an insurer’s enterprise risk management framework. The ORSA idea is a relatively new one that has not yet been fully tested anywhere, and there will surely be an initially steep learning curve for both insurance companies and regulators. The use of sophisticated risk analytics can give insurers new insights on aspects of company operations and associated risks that may not have been properly identified, evaluated, or managed.
