ORSA Summary Report Explained: The Three Sections, the $500 Million Filing Threshold and How Own-View Capital Differs From RBC

An ORSA Summary Report asks an insurer to show its own capital arithmetic in place of the regulator's: how it names its material risks, how each behaves under stress, and whether group capital on the basis the insurer chooses covers the business plan over the next one to three years (NAIC ORSA Guidance Manual, December 2022). About 300 such reports reach lead states each year, roughly 200 at group level and 100 for single entities (NAIC, 2026).

Nowhere does the manual prescribe a factor, a covariance step or an action level. That absence is the design, and it is why the Section 3 capital figure in an ORSA and the RBC ratio filed each March 1 answer different questions. This reference walks the manual, the exemption arithmetic in Model #505 and the places the actuarial function is named. It then sets the three capital measures side by side, a comparison the site's P&C and life and retirement coverage of RBC factor changes assumes the reader already has.

Key Takeaways

• $500 million and $1 billion of annual direct written and unaffiliated assumed premium, excluding premium reinsured with the Federal Crop Insurance Corporation and the National Flood Insurance Program, set the insurer and group exemption lines, so a crop writer with $700 million direct that cedes $250 million to FCIC counts $450 million and is exempt (NAIC Model #505, Section 6).
• Three sections and one signature: the manual asks for a risk management framework, an assessment of risk exposures in normal and stressed environments, and a group assessment of risk capital with a prospective solvency assessment, signed by the chief risk officer or the executive responsible for ERM, and the word "actuarial" appears only in the expectations for internationally active groups.
• 2.0, 1.5 and 0.70 times Authorized Control Level RBC are the company, regulatory and mandatory action levels in Model #312, while the manual lists the Section 3 security standard only as examples ("AA solvency; 99.X% one-year VaR; Y% TVaR; X% of RBC") and says the group figure "should not be perceived as the minimum amount of capital before regulatory action will result."
• 99.5% one-year VaR calibrates the Solvency II Solvency Capital Requirement under Article 101, and Article 45(7) of the same directive states that the EU ORSA "shall not serve to calculate a capital requirement," the same separation between own view and action trigger the NAIC manual draws.
• July 23, 2026 is when the Group Solvency Issues (E) Working Group adopted a manual revision, effective January 1, 2027, asking filers to show how capital allocated to each material risk category contributes to the total, over the objection of the ACLI, which called a risk-level allocation for life insurers "likely" to be "an artificial exercise."

What Each Section Asks For: Framework, Stressed Exposures and Own-View Capital

Section 1 covers the enterprise risk management framework under five headings the manual names: risk culture and governance, risk identification and prioritization, risk appetite with tolerances and limits, risk management and controls, and risk reporting and communication. Filers "should also describe risk monitoring processes and methods, provide risk appetite statements, and explain the relationship between risk tolerances and the amount and quality of risk capital" (NAIC ORSA Guidance Manual, Section 1). Content is expected to track what the board already sees.

Section 2 is the stress section. For each material risk category in Section 1, the report carries "quantitative and/or qualitative assessments of risk exposure in both normal and stressed environments," with credit, market, liquidity, underwriting and operational risk offered as examples. No stress set is prescribed: "U.S. state insurance regulators do not believe there is a standard set of stress conditions that each insurer should test." Stresses do have to be run through to capital, against risk capital requirements, available capital and "regulatory, economic, rating agency, and/or other views of capital requirements," with a description of model validation alongside.

Section 3 is where the capital number lives, and every parameter is left to the filer. The assessment covers "the level of financial resources needed to manage its current business and over a longer-term business cycle (e.g., the next one to three years)." Filers describe their own definition of solvency, valuation regime (GAAP, statutory, economic, IFRS or rating agency), time horizon (one-year, multi-year, lifetime or run-off), risk capital metric (VaR, TVaR or probability of ruin), security standard and aggregation method. Each appears in the manual's methodology table as an example, "not exhaustive." A comparative view against the prior year rounds it out.

A prospective solvency assessment closes Section 3 as "in effect, a feedback loop." Insurers project their "future financial position, including its projected economic and regulatory capital," across the multi-year plan in normal and stressed environments, and describe management actions if capital falls short in quantity or quality. Group-wide adequacy also has to address intra-group double gearing, holding company leverage, fungibility restrictions and contagion risk.

Two mechanical features come from Model #505. Each report "shall include a signature of the insurer or insurance group's chief risk officer or other executive having responsibility for the oversight of the insurer's enterprise risk management process," attesting the process is applied and the board has a copy (NAIC Model #505, Section 5B). Filing is once a year, timed to the insurer's own planning cycle. Confidentiality is statutory: the report is "not subject to subpoena" and "not subject to discovery" in private civil actions (Section 8A). The Act took effect January 1, 2015 and became an accreditation standard in 2017 (NAIC, 2026).

Where the Actuarial Function Is Named

Nothing in Sections 1 through 3 names an actuary. The one passage that does sits in the IAIG expectations: "The IAIG's ORSA should explain how the risk management function, actuarial function, and internal audit function are involved in the risk management of the IAIG" (NAIC ORSA Guidance Manual, 2022 edition). It also asks how that function is involved "in determining the IAIG's solvency position, in any actuarial-related modeling in the ORSA." An IAIG writes premium in three or more countries, with at least 10% outside the home country and $50 billion of assets or $10 billion of gross premium on a three-year average (manual glossary).

On the reviewing side, the Financial Analysis Handbook tells the lead state analyst that Section III "is generally presented in a summarized form." Where it falls short, the analyst "may need to request the assistance of staff actuaries when available in evaluating the reasonableness and adequacy of the stress tests selected" (NAIC Financial Analysis Handbook, 2025 Annual, Section VI.E). Actuaries enter the ORSA as the filer's modellers and the regulator's reviewers, with the signature belonging to neither.

Who Files and What the Number Measures: Threshold Arithmetic and the RBC Comparison

Exemption runs on two tests applied together. An insurer is exempt only if its own premium is below $500 million and its group's premium is below $1 billion, both measured as annual direct written and unaffiliated assumed premium, international included, with FCIC and federal flood premium excluded (Model #505, Section 6A). A $480 million insurer inside a $1.2 billion group files, and the group report covers every insurer in it. A $600 million insurer inside a $900 million group files alone, though the manual adds that the group exemption "does not eliminate the requirement" to complete Section 3. Crossing a threshold gives the insurer one year to comply.

Three cases let the commissioner override the exemption: unique circumstances including "regulatory concerns about the rapidly growing concentration of risk," a hazardous financial condition finding, or an RBC company action level event. Under NAIC Model #312, that event occurs when total adjusted capital sits between 1.5 and 2.0 times Authorized Control Level RBC, or between 2.0 and 3.0 times with a negative trend (Section 3A).

An RBC Plan is then due within 45 days, with projections "in the current year and at least the four (4) succeeding years" of statutory income, capital and surplus (Section 3B). A $300 million insurer at 185% of ACL, otherwise exempt, can be ordered to produce an ORSA on top of that plan.

Built from: Model #312 Sections 1K, 2A and 3; Model #505 Sections 5, 6 and 8; the ORSA Guidance Manual Section 3 methodology table and the IAIG expectations; the 2025 Financial Analysis Handbook ORSA procedures; and Directive 2009/138/EC Articles 45, 48, 101 and 129 as retained at legislation.gov.uk. Multiples are of Authorized Control Level RBC; many 10-Ks quote the same company at half that figure on a company action level basis.

Take a stylised group at 400% of ACL and ask the three questions. On the RBC question, each legal entity needs total adjusted capital above 2.0 times ACL. At 4.0 times, the entities clear the trigger by 200 points and sit above the 300% band where the trend test applies, the level at which the NAIC's RBC topic page says "no regulatory intervention is needed" (NAIC, June 2026). Behind that figure, the RBC root treats most components as either fully independent or fully correlated, a convention worked through in this site's RBC explainer, and that convention is part of what 400% measures.

On the Section 3 question, the test is whether available capital, on the group's chosen basis, covers risk capital at the group's chosen security standard across its three-year plan. Value liabilities on an economic basis, aggregate with a correlation matrix at a one-year 99.5% VaR and deduct holding company debt, and the same group can show a deficit at 400% of ACL or a surplus at 250%. Group risk capital, in the manual's words, "is the capital needed within a holding company system to achieve its business objectives," and the Model #312 triggers are the example it gives of what Section 3 does not measure.

The commissioner-triggered ORSA is answered on a third basis again. An RBC Plan projects statutory surplus for four years on one entity; the ORSA projects the group's own capital over one to three years. Two forward projections of the same company, on different bases and horizons, land on the same desk.

Solvency II draws the same line with statute. Article 45(7) states that the own risk and solvency assessment "shall not serve to calculate a capital requirement." Article 101(3) fixes the SCR at "the Value-at-Risk of the basic own funds of an insurance or reinsurance undertaking subject to a confidence level of 99.5% over a one-year period" (Directive 2009/138/EC), a loss expected "less than once every 200 years" in Skadden's reading (June 2024).

Where the regimes part is in who is named and how much is prescribed. Article 48 puts the actuarial function inside the EU ORSA, and, as the site's Solvency II revision coverage set out, the directive prescribes scenario form and frequency the NAIC manual leaves open. The IAIS Insurance Capital Standard borrows the 99.5% calibration for groups, and the US Aggregation Method that stands in for it is scaled from 200% of ACL. All three regimes meet at the trigger; the own view sits apart in each.

The 2026 Revision: Allocating Own-View Capital by Risk Category

Each new edition of the manual appears "on or about Dec. 15 of each year," and Model #505 makes a change effective "on the January 1 following the calendar year in which the changes have been adopted" (Section 2D). For 2026 the cycle began with a survey that closed November 21, 2025. An exposure draft followed on June 11, 2026, with a 30-day comment period ending July 13.

On July 23, 2026, a joint call of the ORSA Implementation (E) Subgroup and the Group Solvency Issues (E) Working Group adopted the revisions, the subgroup first and then the working group (Forvis Mazars, July 2026). The subgroup's page lists NAIC adoption at the 2026 Fall National Meeting, effective January 1, 2027.

Section 3 carries the substantive change. Its adopted text reads: "Regardless of the approach taken to quantify risk capital, the insurer should present a summary of how the capital allocated to each material risk classification or category contributes to the overall risk capital calculation" (ORSA Guidance Manual, December 2026 draft, Attachment 5). Prospective solvency assessments carry the same request "projected out across the current business plan," with the example bases listed as "RBC components, Economic Capital risks, BCAR risks, Solvency II components, etc."

Three smaller edits travel with it. The Group Capital Calculation is named "an appropriate tool for reporting the regulatory capital at the head of the IAIG level." A group's "debt servicing capacity" joins holding company leverage in the adequacy test. Filers follow a state's specific filing date where one exists.

Industry read the allocation language as a change of kind. ACLI's July 13 letter argued that "enterprise-wide capital planning exercises typically focus on total capital requirements, not requirements at the individual risk classification or category level," and that an allocation reflecting diversification, reinsurance and hedging "would be impractical and approximate given the long-duration nature of the life insurer business." NAMIC, whose members write $383 billion of premium, wrote that the proposal moves "the ORSA toward a more prescriptive approach vs. principles-based approach."

Missouri's P&C actuary Julie Lederer raised a structural question: Section 3 is to encompass "the entire insurance group," while Sections 1 and 2 may not when part of the group is exempt. Adoption went ahead as revised, with the contested points deferred to the 2027 cycle, which starts in September.

Allocation creates the reconciliation problem the manual spent a decade avoiding. A diversified risk capital total is one number; its split by risk category is a method choice among stand-alone, proportional and marginal allocations, and the manual specifies none of them. Its own glossary defines diversification as "the extent to which the combined impact of risks inherent to assets and liabilities is less than the sum of the impacts of each risk considered in isolation," which is exactly the quantity an allocation method distributes differently. Two groups with identical books, identical totals and different allocation conventions will file different splits in 2027.

Opening the example list with "RBC components" invites a lead state analyst to set a 99.5% VaR credit allocation beside the C-1 charge, the comparison the manual's Model #312 sentence exists to head off. Handbook procedures already tell that analyst to "carefully consider projected changes to the group capital position as well as significant shifts in the amount of capital allocated to different risks, which could signal changes in business strategy and risk exposures." A group that moves from stand-alone to Euler allocation between two reports will show capital migrating between categories with no change in exposure, and the handbook tells the reviewer to read that migration as strategy.