Own Risk and Solvency Assessment (ORSA Tool)

Insurance industry in Mongolia is currently facing a shift towards simplified Solvency II regime by leaving behind its conventional control regime. Since January 2019 new regulations on “Risk based capital approach”, “Procedure on risk based control and supervision for insurer’s operation”, “Guidelines on own risk and solvency assessment of the insurer” fall full in force which were approved by Financial Regulatory Commission of Mongolia with the resolution #290, dated 19th of December 2018.

For insurers this means not only meeting minimum capital requirements, technical reserving and solvency ratio set by regulation but also adapting a forward looking approach by setting its business strategy and assess all material risks may face in achieving its objectives and also to define how to best serve the stakeholder requirements such as policyholders, shareholder, regulators and others. Furthermore insurer shall link its risk management framework with governance and decision making process and ensure a robust enterprise wide risk management system proportionate to the nature, scale and complexity of its business.
At the heart of insurer’s risk management is the own risk and solvency assessment and under the “Guidelines on own risk and solvency assessment of the insurer” all insurance undertakings shall develop an appropriate and sufficient “ORSA” system fitted to its operation and shall acknowledge this in written to the Financial Regulatory Commission within 14 days after the board oversight and approval.

Key challenges for the insurer to comply with newly passed regulatory requirements are:

develop an internal assessment system and;

set up the system throughout the organization;

FINS has developed “ORSA Toolkit” system for insurer’s own risk and solvency assessment, which fully complied with regulatory requirements and currently introducing the system to the workings of insurer’s operation.

“ORSA TOOLKIT” system consists of (1) Data entry (2) Calculation (3) Output (4) Risk profile modules and performs “Assessment on market influence of the insurer”, “Overall risk assessment”, “Financial risk assessment”, “Assessment on governance and supervisory framework” and creates insurer’s risk profile by summing up the results of the assessments performed. This will enable insurers to assess, manage, review and report all material risks such as credit, market, insurance, operational, legal, and strategic, group risks.