https://www.insurerbrain.com/w/index.php?action=history&feed=atom&title=Definition%3AHigher_loss_absorbency_%28HLA%29 2026-06-13T14:03:41Z Revision history for this page on the wiki MediaWiki 1.43.8 https://www.insurerbrain.com/w/index.php?title=Definition:Higher_loss_absorbency_(HLA)&diff=9140&oldid=prev 2026-03-11T05:01:29Z

<p>Bot: Creating new article from JSON</p> <p><b>New page</b></p><div>🏦 &#039;&#039;&#039;Higher loss absorbency (HLA)&#039;&#039;&#039; is a capital surcharge imposed on insurers designated as [[Definition:Global systemically important insurer (G-SII) | global systemically important insurers (G-SIIs)]], requiring them to hold additional capital reserves beyond the standard [[Definition:Regulatory capital | regulatory capital]] requirements. Developed by the [[Definition:International Association of Insurance Supervisors (IAIS) | International Association of Insurance Supervisors (IAIS)]], HLA targets the firms whose failure or distress could trigger cascading disruptions across global financial markets. The surcharge acts as a buffer that strengthens the resilience of these systemically significant organizations and reduces the probability that taxpayers or the broader economy bear the cost of an insurer&#039;s collapse.<br /> <br /> ⚙️ The mechanics of HLA build on the foundation of [[Definition:Basic capital requirement (BCR) | basic capital requirements (BCR)]], which establish a baseline level of capital for internationally active insurance groups. On top of the BCR, the HLA layer adds a percentage-based uplift calibrated to the specific [[Definition:Systemic risk | systemic risk]] profile of the designated insurer — factoring in its size, interconnectedness, [[Definition:Non-traditional non-insurance activity (NTNI) | non-traditional non-insurance (NTNI) activities]], and global reach. Supervisors assess these dimensions using indicator-based scoring methodologies, and the resulting HLA requirement varies by entity, ensuring that firms posing greater systemic threats carry proportionally heavier capital burdens. The surcharge must be met with high-quality capital instruments that can genuinely absorb losses in times of stress.<br /> <br /> 📊 As the global insurance [[Definition:Regulatory framework | regulatory framework]] continues to evolve — particularly with the development of the [[Definition:Insurance capital standard (ICS) | Insurance Capital Standard (ICS)]] — the HLA concept remains central to macroprudential oversight of the insurance sector. It sends a clear market signal that size and complexity carry regulatory consequences, incentivizing firms to reassess risk-taking behavior and simplify structures where possible. For [[Definition:Reinsurance | reinsurers]] and large composite groups operating across jurisdictions, understanding HLA is essential for strategic capital planning, merger-and-acquisition decisions, and maintaining favorable relationships with supervisory authorities worldwide.<br /> <br /> &#039;&#039;&#039;Related concepts:&#039;&#039;&#039;<br /> {{Div col|colwidth=20em}}<br /> * [[Definition:Global systemically important insurer (G-SII)]]<br /> * [[Definition:Basic capital requirement (BCR)]]<br /> * [[Definition:Insurance capital standard (ICS)]]<br /> * [[Definition:Systemic risk]]<br /> * [[Definition:International Association of Insurance Supervisors (IAIS)]]<br /> * [[Definition:Solvency margin]]<br /> {{Div col end}}</div>

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