Spokesmen for insurance-trade groups insist that when all issaid and done, officials of the Financial Stability OversightCouncil (FSOC) will support insurers' view that insuranceactivities, by their very nature, do not pose a threat to thestability of the U.S. financial system.

J. Stephen Zielezienski, theAmerican Insurance Association's general counsel, says the AIAbelieves property & casualty insurers should be screened out ofthe systemically important financial institutions (SIFI)designation since they do not pose a threat to financialstability.

“AIA hopes that [the FSOC] will use the designation sparinglyand apply it only to the companies that pose a systemic threat toU.S. financial stability.”

Ben McKay, senior vice president of federal government relationsfor the Property Casualty Insurers Association of America, says ina statement, “The final FSOC rule takes important steps torecognize that traditional home, auto and business-insuranceactivities are not systemically important.”

McKay adds that the Dodd-Frank Act appropriately treatedinsurance very differently than other sectors of thefinancial-services industry.

The final regulation establishes a three-step screening processfor determining whether a non-bank such as an insurer should besubject to regulation by the Federal Reserve Board because, underthe criteria established under the Dodd-Frank Act, it represents apotential risk to the stability of the U.S. financial system.

Jeff Schuman, a Keefe, Bruyette & Woods (KBW) life-insuranceanalyst, says the Financial Stability Oversight Council's finalrule casts a wider net than expected over those that might get acloser look and takes an “expansive view” of defining a company'sdebt.

Brian Gardner, also a KBW analyst, says the rule willallow the second and third steps of the FSOC's screening process toprovide for a “narrowing from a broad universe, which will createsomething more manageable for the FSOC to consider.”

Gardner cautions that this is “going to be a very longprocess.

“The SIFI designation will ultimately not be reduced to simplerules and calculations,” he adds, calling the process “a fluidexercise, not static. Companies first designated could later beundesignated; this will be a dynamic process.”