Own Risk and Solvency Assessment (ORSA) - NAIC Model Act ORSA-S2: Guidance Manual Section 2: Insurer's assessment of risk exposures

Section 2 summarises quantitative and qualitative assessments of exposure for each material risk category named in Section 1 (for example underwriting, credit, market, liquidity and operational risk) under both normal and stressed conditions, with methods proportionate to how large and complex the risks are and a range of outcomes considered. It may describe the risks, methods, key assumptions, mitigation and adverse scenarios; qualitative assessment is acceptable where quantitative methods are immature, such as for some operational and reputational risks. The assessment weighs likelihood and impact on balance sheet, income and cash flows and the effect of stress on capital under regulatory, economic, rating agency or other views; follows the way the business is managed (group, entity or other basis); states tolerance limits and how they were set; describes model validation and calibration; and sets expected-value assumptions from anticipated experience and expert judgement. Regulators prescribe no standard stress set but may give input on stress levels, assumptions and scenario generator parameters.