The International Association of Insurance Supervisors says treatment of losses among global systemically important insurers (GSIIs) should be comparable across all regions.

It has created 10 principles that will guide development of higher loss absorbency requirements for such groups.

The first principle calls for minimal distortions in valuation or other relevant processes across jurisdictions, although they need not be identical.

Drivers for higher loss absorbency are to be reflected in GSII’s risk structures.

“GSIIs should be required by their group-wide supervisors to hold higher levels of regulatory capital than would be the case if they were not designated GSIIs,” the association says.

“The higher loss absorbency should be set at a level that offsets any advantage that may be expected to arise from the GSII designation.”

The other principles address the way historic data should be used when testing against financial impacts on GSIIs and capital standards needed to maintain such insurers as “going concerns” rather than “gone concerns”.

The association also wants absorbency requirements to be “pragmatic and practical”.

“The form of presentation of the high loss absorbency, focusing on meaningful communication to external parties, should be practical yet sufficiently granular for the results to be fit for purpose.

“It should utilise the minimum number of parameters and data requirements, while attaining valid and robust outcomes with a focus on material issues.”

The IAIS says any higher loss absorbency requirement will be refined after field tests.