Biennial Report to the 83rd Texas Legislature: Department of Insurance Page: 7
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Recommendations
Financial
ORSA
Background:
TDI regulates both insurance carriers and the relationships between insurance carriers and their affiliates.
TDI also monitors the financial condition and risk profiles of holding company systems or "groups" of
affiliates. This is a foundational component in TDI's solvency regulation of insurance carriers, because risks
posed by non-insurance operations can potentially spread to insurance companies and negatively impact
their financial condition. The NAIC recently adopted the Own Risk Solvency Assessment (ORSA) Model
Act in response to lessons learned from the global financial crises, as well as discussions held at the
international level about group supervision. An ORSA is an internal assessment of the risks associated with
an insurer's or insurance group's current business plan and the sufficiency of its capital resources to support
those risks. The new NAIC model act requires insurance companies or insurance groups to perform their
own risk and solvency assessment ORSA and to file an ORSA summary report with insurance regulators.
Issue:
Adding a requirement for certain insurance carriers to file ORSA summary reports with TDI will improve
TDI's understanding of large insurance carriers and their holding company systems and will provide TDI
with a group-level perspective on risk and capital. This would also enhance TDI's ability to participate in
the supervision of insurers and insurance groups domiciled in multiple jurisdictions and improve regulatory
coordination at the national and international levels. ORSA summary reports would provide TDI with a
necessary tool to evaluate the financial condition of the largest insurance companies in order to better
protect Texas policyholders.
Recommendation:
" Amend the Texas Insurance Code by adding a new chapter based on the NAIC Risk Management and
Own Risk Solvengi Assessment ModelAct. The NAIC Model Act language is recommended in order
ensure uniformity and consistency in regulatory requirements from state to state, which is important
for insurance carriers with multistate operations.
o The new recommended Code chapter should require large insurers and insurance groups to
maintain a risk management framework; to regularly perform an ORSA; and to annually file
an ORSA summary report with the commissioner. The report should also be available upon
request.
o The new chapter should also provide an exemption from these requirements for smaller
insurers and insurance groups, address the confidentiality of the ORSA Summary Report,
and outline other filing requirements.7
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Reference the current page of this Report.
Texas. Department of Insurance. Biennial Report to the 83rd Texas Legislature: Department of Insurance, report, December 2012; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth575994/m1/8/: accessed July 16, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.