As your company prepares for ORSA, how do you know if your perception of readiness matches reality? In the 2012 PwC ORSA readiness survey1, over 80% of insurers felt their ERM frameworks were ORSA ready, yet only 38% had Boards that were more than passively engaged in ERM/ORSA, and only 35% had developed risk appetites that were linked to business strategy.
Since then, we have observed only incremental improvement in insurers' ERM frameworks. Few insurers have prepared their Boards for new responsibilities, and most still struggle to operationalize their risk appetite statements.
Accordingly, 2014 is the time to put in place a strong ERM framework. These three steps should help you move forward faster:
1. Prepare a draft ORSA Summary Report to assess the current state of the underlying ERM activities. This will help you identify any areas for improvement in processes and the report, and provide you enough time prior to your official regulatory submission to address any gaps.
2. Incorporate the quantitative portions of ORSA into your 2014 business plan. Doing so will help you test your "business as usual" capabilities to support ongoing ORSA Report production.
3. Communicate your ORSA vision to critical audiences so that employees, stakeholders, and regulators can adjust to any coming changes.
We describe these three steps in more detail below.