Insurance & Actuarial8 min read

ORSA Best Practice: Building a Supervisor-Ready Process

By Jonas Adam Mohamed Osman, known as Yonas Osman

CEO of Quantica Risk

60 Rue François Ier, 75008 Paris, France

Published 15 October 2026

Practical guidance on ORSA best practice: forward-looking scenarios, capital planning integration and governance supervisors expect from insurers.

Executive answer

The Own Risk and Solvency Assessment remains one of the most scrutinised documents in an insurer's regulatory calendar, yet many firms still treat it as an annual compliance exercise bolted onto existing capital reporting. Supervisors increasingly expect the ORSA to demonstrate genuine forward-looking risk management, with scenarios tailored to the firm's actual business model rather than generic market-wide stresses borrowed from peer templates.

A credible ORSA links strategic decision-making, risk appetite and capital planning into a single coherent narrative that the board can defend under questioning. EIOPA supervisory reviews consistently flag ORSAs where the forward-looking assessment reads as an afterthought to the Pillar 1 solvency position, rather than genuinely informing business planning, product pricing or reinsurance strategy over the planning horizon.

Scenario design and own risk profile

Effective ORSAs move beyond the standard formula risk categories to capture risks specific to the undertaking, such as concentration in a single distribution channel, dependency on a reinsurance counterparty, or exposure to a narrow geographic peril. Supervisors want to see evidence that management identified these risks through its own processes, not simply inherited them from the Solvency Capital Requirement structure, and that the deviation between standard formula and own risk profile is explained quantitatively where material.

Climate and emerging risks now feature prominently in EIOPA's ORSA expectations, with firms expected to incorporate at least qualitative climate scenario narratives and, for larger insurers, quantitative long-term scenario analysis consistent with NGFS pathways. Firms that bolt on a generic climate paragraph without linking it to underwriting or investment exposure tend to draw supervisory follow-up questions during the annual dialogue.

Integrating capital planning and business strategy

The strongest ORSAs are produced as a by-product of genuine business planning cycles, where capital projections under base and stress scenarios directly inform decisions on new product lines, dividend policy and reinsurance purchasing. This requires finance, actuarial and risk functions to share a common planning model rather than reconciling separate outputs late in the process, which is where many ORSA timelines break down under deadline pressure.

Reverse stress testing, identifying the scenarios that would breach risk appetite or regulatory capital thresholds, is increasingly expected as a standard ORSA component rather than an optional extra. Boards should be able to articulate what management actions would be triggered at each stage of deterioration, and these management actions should be realistic and previously tested, not theoretical levers assumed to work perfectly when needed most.

Governance, documentation and supervisory dialogue

Board engagement is the single factor supervisors cite most often when distinguishing strong ORSAs from weak ones; minutes should show genuine challenge of assumptions, not passive approval of a document prepared entirely by the actuarial function. Non-executive directors are expected to understand the key sensitivities driving the solvency projection and to have questioned at least one material assumption before sign-off.

Documentation should trace each material judgement back to its rationale, including why particular stress severities were chosen and how they relate to the firm's risk appetite statement. Version control matters too: supervisors reviewing multi-year ORSA submissions look for consistency in methodology year on year, with any changes clearly flagged and justified rather than silently altering unfavourable trend lines.

Conclusion

An ORSA built around genuine business planning rather than retrofitted compliance narrative delivers more value to the firm and draws fewer supervisory follow-up questions. The discipline of articulating own risk profile, management actions and capital trajectory consistently each year is itself a risk management benefit, independent of the regulatory requirement.

Firms that invest in integrating ORSA scenario design with actual strategic planning cycles tend to find the exercise becomes less burdensome over time rather than more. Jonas Adam Mohamed Osman, CEO of Quantica Risk, approaches ORSA reviews by testing whether the stated management actions would actually survive the scenario that triggers them, which is usually where client assumptions most need sharpening.

Primary sources

ORSASolvency IIrisk governancecapital planning