ORSA in the Caribbean: From Regulatory Filing to Genuine Risk Management Discipline

Most regional ORSAs are written for the supervisor. The next generation will be written for the board. The difference is starting to matter — to regulators, to rating agencies, and to the carriers themselves

The Own Risk and Solvency Assessment (ORSA) is the most consequential governance document a regulated insurer produces. Done well, it tells the board what genuinely keeps the carrier awake at night, quantifies the carrier’s own appetite for the risks it bears, and makes capital allocation a decision rather than a residual. Done as compliance, it produces a thick document filed annually that the board has not genuinely engaged with and the supervisor reads without expecting anything new. Most Caribbean ORSAs sit closer to the second outcome than the first. That position is no longer sustainable.

 

Where Caribbean ORSAs stand today

Most Caribbean insurance regulators introduced ORSA requirements between 2014 and 2020. The early years of the regime were appropriately focused on getting carriers to produce a document at all — building the risk-identification disciplines, the capital-projection capability, and the governance scaffolding required to satisfy the supervisory expectation. By 2022 the regional industry had largely cleared that bar. Today almost every Caribbean insurer of meaningful scale files an annual ORSA. Almost every Caribbean ORSA is reviewed by its supervisor. Almost every Caribbean board signs off on the document. By the narrow measure of compliance, the ORSA regime works.

By the broader measure of risk management impact, the picture is more uneven. A meaningful share of Caribbean ORSAs are produced by the actuarial function or an external advisor, reviewed by the chief risk officer for technical correctness, presented to the board risk committee for ratification, and filed with the supervisor on the prescribed timetable. The document satisfies the regulation. It does not, in most cases, change anything about how the carrier makes decisions between filings. The capital projections do not feed pricing committee decisions. The risk appetite statements do not feed product approvals. The stress scenarios are run once a year and then put away until next year. The ORSA exists; it is not, in any operational sense, working.

The ORSA exists. It is not, in any operational sense, working.

Three capabilities a working ORSA should have

The difference between an ORSA written for the supervisor and an ORSA that runs the business comes down to three operational capabilities. Each is buildable. None requires the carrier to invest at the scale required by IFRS 17 or major systems replacement. Together they transform the ORSA from an annual filing into a continuous risk management discipline.

Capability 1 — A risk appetite statement that constrains decisions

Most Caribbean carriers have a risk appetite statement. Few have a risk appetite statement that constrains decisions. The distinction matters. A statement that says ‘the carrier will not accept material losses to capital under reasonable stress’ is not a constraint — it is a tautology. A statement that says ‘the carrier will hold capital sufficient to absorb a one-in-fifty-year loss in any single line of business without breaching the regulatory minimum’ is a constraint. The first cannot be tested against any specific decision. The second can be tested against new-product approvals, reinsurance retention decisions, investment allocation choices, and acquisition opportunities. A risk appetite statement earns its place in the ORSA when the carrier can credibly point to decisions it has declined to make because the appetite would not support them.

Capability 2 — A capital projection that informs strategy

Capital projection is, in principle, the analytical core of an ORSA. The carrier projects its capital position over a three- to five-year horizon under base, optimistic, and stressed scenarios, and identifies the strategic actions available to the carrier under each. In practice, most Caribbean ORSA capital projections are exercises in technical correctness rather than strategic insight. The numbers reconcile, the methodology is documented, the supervisor accepts the output. But the projections rarely feed the strategic-plan conversation, the capital-management decisions, or the dividend recommendations the board is making in the same meeting. The ORSA capital projection and the corporate plan operate in parallel rather than as integrated disciplines. A working ORSA produces one capital projection, used by the supervisor, the board, the strategy function, and the finance function as a shared analytical foundation.

Capability 3 — Stress scenarios that surface insight

Stress scenario design is where the most Caribbean ORSAs do their least useful work. Scenarios are typically built around prescribed shocks — a defined equity market decline, a defined interest rate move, a defined credit deterioration — and produce defensible but predictable outputs. The exercise satisfies the supervisor; it rarely tells the board anything it did not already know. A working ORSA inverts the question. Rather than asking ‘what happens to the carrier under prescribed shocks?’ it asks ‘what scenarios would meaningfully threaten this carrier’s capital position over the next three years?’ The scenarios that emerge from that question — catastrophic hurricane combined with reinsurer default, a specific large-claim concentration risk crystallising, a regulatory change to capital treatment of a specific asset class — are the scenarios the board needs to see. They are also, almost always, the scenarios prescribed exercises do not produce.

THE TEST FOR EACH CAPABILITY For each of the three capabilities, the test is whether the carrier can name a specific decision it has made differently because of the ORSA. A risk appetite that constrains decisions can name a product approval, retention level, or investment allocation that the carrier reconsidered because the appetite would not support it. A capital projection that informs strategy can name a strategic option the carrier evaluated against ORSA outputs before deciding. A stress scenario that surfaces insight can name a risk the board now monitors actively because the scenario revealed it. If none of the three tests can be passed, the ORSA is compliance machinery without a managerial purpose.

Why the supervisory conversation is changing now

Caribbean prudential supervisors have moved through three distinct phases of ORSA expectation over the last decade. Phase one was about producing a document at all. Phase two, which dominated the early 2020s, was about technical adequacy — the methodology, the documentation, the governance scaffolding. Phase three, now beginning, is about whether the document is connected to the business. The questions supervisors are starting to ask have shifted: not whether the ORSA exists, not whether the methodology is defensible, but whether the carrier can demonstrate that the ORSA informs material decisions between filings.

Several developments are pushing the regional supervisory dial in the same direction. The Bermuda Monetary Authority has been explicit, for several years, that ORSA quality is a meaningful differentiator in its risk-based supervision. FSC Jamaica has, in its more recent supervisory cycles, moved from confirming ORSA filings to interrogating ORSA content. CBTT has signalled similar expectations through its consultation on revised risk-based capital regulation. The FSCB in The Bahamas and the FSC in Barbados are moving along comparable trajectories. None of these supervisors will publish a single set of explicit ORSA quality criteria; collectively they are producing supervisory practice that increasingly distinguishes carriers using the ORSA from carriers producing one.

Rating agencies are moving on the same vector. AM Best, S&P, Fitch, and Moody’s all incorporate ORSA quality into their assessments of an insurer’s enterprise risk management capability, and the carriers that present credible, board-engaged, decision-informing ORSAs receive treatment that the carriers presenting filed-and-forgotten documents do not. The signalling value of an ORSA is now meaningful at the rating agency interaction, the reinsurer renewal conversation, and the prospective-acquirer discussion. Carriers that have built the three capabilities described above can demonstrate them in each of these conversations; carriers that have not increasingly find the conversation moving on without them.

The signalling value of an ORSA is now meaningful at the rating agency interaction, the reinsurer renewal conversation, and the prospective-acquirer discussion.

What gets in the way of a working ORSA

If the case for a working ORSA is this clear, the question is why more Caribbean carriers have not yet built one. Three obstacles recur. Naming them honestly is the precondition for working around them.

The CRO function is under-resourced

Most Caribbean carriers below the largest tier do not employ a dedicated chief risk officer with the seniority, mandate, or analytical support to drive ORSA evolution. The risk function is frequently combined with compliance, legal, or actuarial responsibilities, with the CRO title attached to a senior leader whose principal day job is something else. This structure produces a document that satisfies the regulation; it does not produce the institutional ownership required to move ORSA from filing to discipline. Carriers that want a working ORSA need either a stand-alone CRO with appropriate mandate, or external advisory capacity that can perform the same role on a fractional basis.

The board risk committee is not yet differentiated from the audit committee

Many Caribbean carriers have not yet meaningfully differentiated the board risk committee from the board audit committee. The two committees often share members, agendas, and operating rhythms, and the risk committee’s role becomes ratification of papers prepared elsewhere rather than independent direction-setting. A working ORSA requires a risk committee that can challenge the risk appetite statement, push back on capital projection assumptions, and demand stress scenarios the executive would not otherwise propose. That requires structural separation from audit and a chair with the time, expertise, and authority to drive it. Caribbean boards are increasingly making this separation; the carriers that have not are usually the carriers whose ORSAs are most plainly written for the supervisor.

The actuarial function and the risk function are not yet integrated

The third obstacle is operational. In most Caribbean carriers, the ORSA is produced by the actuarial function in consultation with the risk function rather than as a genuinely joint product. The actuarial team runs the capital projections, drafts the methodology sections, and supplies the technical content. The risk function reviews the document for completeness and adds the governance and risk-appetite framing. Both teams do good work; the integration between them is frequently shallow. A working ORSA requires the actuarial and risk functions to operate as a single integrated team, with shared ownership of the document, shared accountability for the outcomes, and shared engagement with the supervisor. The carriers that achieve this integration produce noticeably stronger ORSAs; the carriers that do not produce documents in which the technical sections and the governance sections sit beside each other without genuinely informing each other.

THE PATH TO A WORKING ORSA A Caribbean carrier moving from compliance ORSA to working ORSA over the next 12 to 18 months typically does three things in sequence. First, it builds genuine institutional ownership of the document — either through dedicated CRO capacity or fractional external support. Second, it differentiates the board risk committee from the audit committee and gives it the mandate to challenge the executive’s risk view. Third, it integrates the actuarial and risk functions in producing the ORSA as a joint product. The investment is meaningful but is dwarfed by the value of the result: an ORSA that genuinely informs the board’s understanding of its own carrier, and that earns the carrier credibility with supervisors, rating agencies, and prospective partners.

Why this matters for the next 18 months

Every Caribbean insurance regulator has signalled, through some combination of supervisory practice and informal guidance, that ORSA quality will receive increasing attention. Every rating agency that covers Caribbean carriers is incorporating ORSA quality into its enterprise risk management assessment. Every prospective acquirer or reinsurance partner sophisticated enough to evaluate a Caribbean carrier is reading the ORSA as a signal of how the carrier understands itself. The supervisory pressure, the rating signal, and the commercial signalling value are all moving in the same direction at the same time.

The carriers that move now to build the three capabilities described in this article — a risk appetite statement that constrains decisions, a capital projection that informs strategy, stress scenarios that surface insight — will be in a fundamentally different position 18 months from now than the carriers that wait for the supervisory pressure to become explicit. The question for boards is not whether ORSA matters. The question is whether the carrier’s ORSA, in its current form, can credibly answer the questions that increasingly sophisticated readers are starting to ask of it. For most Caribbean carriers, the honest answer is not yet. The work to change that answer can begin in the next quarter.

ABOUT THE SERIES The Caribbean Actuarial Imperative is a 16-article series from Dawgen Global’s Actuarial & Insurance Regulatory Advisory Division. The series examines the structural shifts reshaping Caribbean insurance — pricing, reserving, reinsurance, enterprise risk, regulation, experience data, modelling technology, and transactions — and what insurance boards, executives, and regulators should be doing about them. The Actuarial & Insurance Regulatory Advisory Division is Fellowship-led, independent of any global broker or reinsurance group, and integrated with Dawgen Global’s broader Risk Advisory, Audit & Assurance, Tax Advisory, M&A, IT, and Cybersecurity practices. Enquiries: [email protected] Please reference ‘Actuarial Division — ORSA Advisory’ in your subject line.

 

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