Moody's says the IAIS vision of rules would be general “policy measures” focusing on reducing the insurer's risk of creating financial disruption.

The IAIS' recommendations include:

• Increase in risk-based capital requirements.
• Separate legal structures for traditional and non-traditional activities.
• Greater global coordination of supervision of a carrier by regulators.

In an interview, Bazer says the thrust of the regulations is to set-up measures to identify companies at higher risk, and then to take measures to avert a situation where the failure of an insurer with a global reach could impact other financial markets, producing a domino effect of disruption to the world markets.

The rules have a lot of commonality with proposals by regulators in the United States to determine the systemic risk of an insurer, and would help coordinate regulations across jurisdictions, helping weaker jurisdictions benefit from the influence of stronger ones, says Bazer.

The IAIS proposal would begin with the collection of data sometime in the first half of 2013 and would require more extensive supervisory requirements by 2017 at the earliest.

But J. Stephen Zielezienski, general counsel for the American Insurance Association, says that while there are some good aspects to the IAIS' proposal, what really matters are the details that define what a systemic risk is.

Citing the U.S. Financial Stability Oversight Council's designation of what defines a systemically important financial institution (SIFI), Zielezienski says the domestic version has designated benchmarks that can inform a company of when it has reached financial markers indicating the company is likely to be considered a systemic risk.

“This is a start, but there still needs to be a lot of work,” says Zielezienski. “We have to get to a place where, at least as a screening mechanism, there are some quantitative metrics that companies can actually run and measure themselves from the threshold; then compare themselves with other sectors.

“While the focus is correct, the devil is in the details,” says Zielezienski.

Whatever comes out of the discussions, both internationally and domestically, Zielezienski says there should be no traditional insurers that make it into the systemic-risk program, but how that stacks-up against what IAIS ultimately decides to incorporate “is still a bit premature.”

In an e-mail, Steve Broadie, vice president, financial policy for the Property Casualty Insurers Association of America said, “PCI agrees with the IAIS conclusion that there is no 'evidence of traditional insurance either generating or amplifying system risk within the financial system or in the real economy.'

“While some important details of the IAIS methodology need clarification, we agree with Moody's that few insurers are likely to be placed on the G-SII list. PCI thinks it is particularly unlikely that companies primarily engaged in writing traditional property casualty business will be designated.”

This story was updated June 12 at 5:03 p.m. EDT with comments from Broadie.