Insurance interests embraced comments by Federal Reserve Gov.Daniel K. Tarullo urging careful consideration when designatinginsurers as non-bank systemically important financial institutions(SIFIs), even if it was unclear at whom the remarks were aimed.

“It is important to take the time to evaluate carefully theactual systemic risk associated with these (insurance) companies,and to understand the amount of such risk relative to otherfinancial firms, before fixing on a list of firms and surcharges,”Tarullo stated in remarks Feb. 22 in New York.

It is unclear if Tarullo was targeting his remarks to theInternational Association of Insurance Supervisors (IAIS) or theFinancial Stability Board (FSB), which makes the finaldetermination on these designations.

The sentiment seems sympathetic with the take of biginsurers, a representative of which said policymakers have beendismissive in meetings when industry reps argue that insurers aredifferent than banks as representatives of the FSB and the IAISconsider methodologies to name global firms as systemicallyimportant.

John H. Fitzpatrick, secretarygeneral of the Geneva Association, welcomed Tarullo's remarksin a short interview Monday, stating, ”Ultimately, theevidence should drive policy-making and I think that is what yousee reflected in Daniel Tarullo's speech and remarks.”

The Basel-based Geneva Association membership comprises astatutory maximum of 90 CEOs from the world's top insurance andreinsurance companies.

The Geneva Association has warned that traditional insurancefeatures too prominently in IAIS indicators, creating asituation that could result in non-risky insurers being designatedas systemically risky and systemically risky insurers avoidingdesignation.

The Federal Reserve has been more stringent ingrouping insurers subject to its regulation and oversight withbanks under Dodd-Frank, but Tarullo was commenting in his New Yorkremarks not so much on domestic policy as international.

Tarullo was discussing work on designating non-bank SIFIs[internationally], and noting that, to date, it has “been pursuedmostly in the IAIS and thus has concentrated on insurancecompanies.”

Tarullo, very active on Dodd-Frank Act detail work at the Fed,was speaking at the Cornell International Law Journal Symposium on“International Cooperation in Financial Regulation.”

U.S.-based insurers are alarmed with many of the elements thatwould be applied to any insurance company designated as a globallysystemically important insurer (G-SII).

The IAIS financial stability committee had met on Jan. 14 in NewOrleans to host a discussion on policy measures that would beapplied to G-SIIs, although not much will be known on how thecomments are received until the first, if any, G-SIIs are named.This move is expected in April, with annual designations thereafterexpected each November, according to the IAIStimeline.

However, Tarullo's remarks lent credence to the argument byinsurers that they are different from banks. The bankregulatory-heavy FSB will ultimately decide on G-SIIs, and mostinsurers believe that insurers are not, by and large, systemicallyrisky, especially when compared to the largest banks.

To that end, the Geneva Association releasedan update to a benchmark study it previously conducted, calledthe Cross-Industry Analysis—28 G-SIBs vs. 28Insurers, Comparison of systemic riskindicators.

The original study, released in December, compared the named 28Global Systemically Important Banks (G-SIBs) and 28 of the world'slargest insurers on indicators of systemic risk. The studyexamined 17 indicators required by IAIS data calls that arecomparable between insurers and banks to provide an analysis of thesize of each activity.

The recent update compares the landscape between insurers andthree banks removed from the special-designation list inNovember.

In most of the compared indicators, the three removed banks arestill significantly larger than the largest insurers selected forthe original study, the updated research showed.

Tarullo spoke about insurance in a section of his remarksdedicated to subjects that he believes should be emphasized in thenear term.

Specifically, Tarullo, stated, “As to the framework forsystemically important financial institutions, I would urge thattwo ongoing initiatives be completed over the next year and twoideas that have been in the discussion stage be developed intoconcrete proposals.”

The IAIS work and a capital surcharge for banking SIFIs appearunder the Basel Committee to be the initiatives the Fed seems towant done in the next year, according to the remarks.

At the conclusion, Tarullo said that a “reenergizedinternational agenda for cooperation in international financialregulation” will continue to evolve.

The IAIS had no comment–a response from Treasury/FIO waspending at presstime.