The International Association of Insurance Supervisors (IAIS) has established 10 principles to guide development of its risk-based global capital standard.

They will be used to create a standard for international active insurance groups (IAIGs) and global systemically important insurers (GSIIs).

“The standard incorporates consistent valuation principles for assets and liabilities, a definition of qualifying capital resources and a risk-based capital requirement,” the association says.

“The amount of capital required to be held and the definition of capital resources are based on the characteristics of risks held by the IAIG, irrespective of the location of its headquarters.”

One principle addresses policyholder protection and risks to global financial stability.

Others concern high loss absorbency for GSIIs, material risks for IAIGs and cross-border analysis and supervision.

The association also calls for “an appropriate balance between risk sensitivity and simplicity”.

“Underlying granularity and complexity are sufficient to reflect the wide variety of risks held by IAIGs,” it says. “But additional complexity that results in limited incremental benefit in risk sensitivity is avoided.”