I'm not convinced the AI really even needs a surrender condition, and if it does, it should be either imminent bankruptcy or defending multiple wars.
What it needs is modifiers to its ability to accept peace agreements that are more reasonable. As I've said repeatedly (and TMIT mentioned) it actually does know that it's screwed; I'm quite certain AI Austria can do the same calculations that AI Augsburg is doing that makes Augsburg decide to declare unilateral war into the emperor. They both know Austria is screwed, but Austria can't make peace because the modifiers aren't there. They just need those modifiers - in debt, no manpower, multiple wars, under siege just not occupied yet, etc - to factor into the numeric peace screen.
Hypothetical example - I attack Brunswick. No allies involved. I siege down Hoya and Hannover (I think they're called), and lay siege to Brunswick (the capital with the fort too). I've stackwiped them, obviously. The warscore at this point is likely to be under 50, and their willingness to accept peace is likewise quite low. In fact, since I don't own the only nearby fort, they're going to be extremely stubborn! Fast forward half a year, the fort is breached, the siege is at 49%, the warscore is still under 50 and their acceptance has likely barely gone up. One day later, siege finishes, 100% warscore, accept any demands, no stipulations and no penalties. The problem here is not and will not be that Brunswick needs unconditional surrender, its that it needs to realize it's screwed before the siege finishes, and not go from 40% to 100% overnight when the reality of the situation hasn't actually changed for them, they were just as screwed before. Extend this to things like Austria, stuck in 3 wars, 0 manpower, 15 loans in debt, it has to know it's screwed just as well as the other AI do (they can all do the same AIing after all) but in this case, they refuse to make peace deals while Salzburg and Bavaria have no numerical calcs preventing them from becoming the 4th and 5th to declare wars on Austria.
Basically, just give the AI reasonable ability to make peace on their actual situation, based on what the AI clearly already knows is actually up and less on silly all or nothing counts, with things like a +/- for how the war's going, for manpower&debt, for its interest in the demand outcome, etc. I don't think the AI really should even need unconditional surrender in most normal circumstances, in fact I don't think a human should even need it in SP outside the very extreme (eg silly coalitions).