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Purpose (partial) "The purpose of this IAIS Consultation Document is to obtain input regarding the development of the Higher Loss Absorbency (HLA) requirement to apply to Global Systemically Important Insurers (G-SIIs). When the HLA is implemented G-SIIs will be expected to hold regulatory capital that is not less than the sum of the required capital amounts from the Basic Capital Requirements (BCR) and the HLA."

Additional Nematrian Commentary This document is the first in a likely series of IAIS consultation documents on the HLA element of capital requirements for G-SIIs. The working definition of systemic risk adopted in the document is the same as that proposed in IMF (2009): "Systemic risk is the risk of disruption of financial services that is caused by impairment of all or parts of the financial system and has the potential for serious negative consequences for the real economy." It also includes a summary of the IAIS’s position on systemic risk (and the role of insurers in it) which is: "- Differences between the traditional insurance business model and the banking business model need to be considered when assessing the systemic importance of insurance. - The time dimension is important in insurance (both in respect of business model and regulatory action) as runs on insurers are uncommon. - There is little evidence of traditional insurance either generating or amplifying systemic risk. - NT [non-traditional] and NI [non-insurance] activities within insurance firms or groups may generate or amplify systemic risk. - The insurance sector is susceptible to systemic risk generated in (or transmitted through) other parts of the financial sector."

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