The current selection process by the Financial StabilityOversight Council (FSOC) will be ongoing, not a one-time thing,according to the chief advisor to Deloitte Insurance Group.

After completing its current review of U.S. insurers as non-banksystemically important financial institutions (SIFI), the FSOC islikely to next turn its attention to large international insurersdoing business in the U.S., according to Deloitte's Howard Mills,who is a former New York insurance commissioner.

“Although they are not headquartered in the U.S., they do mostof their business in the U.S., too much to not to be a U.S. SIFI,”he said. “The FSOC will have to deal with that question.”

He says the first companies to be so examined are likely toinclude Prudential Plc of Great Britain, Allianz SE of Germany,Assicurazioni Generali S.p.A., Aviva plc of Great Britain, AXA S.A.Inc. of France and Ping An Insurance Group Company of China,Ltd.

These companies, as well as American International Group (AIG),Prudential Financial and MetLife, were cited last week as globalSIFIs by the G-20's Financial Stability Board.

In the U.S., the FSOC recently designated AIG as a SIFI andseeks to designate Pru Financial as a SIFI. It has also movedMetLife to the third stage of such designation.

Pru Financial is challenging the FSOC, and a hearing on theissue was held by the FSOC this week. MetLife said it would alsochallenge such a designation.

In other comments, Mills said that “the fact is that theinsurance industry is unanimous in its view that no insurer shouldbe a SIFI.”

However, he said there is “no question that the industry isheading toward a dual regulatory environment.”

“The U.S. will continue to have state regulation, with somedegree of federal involvement through the Federal Insurance Officeor other agencies…that is certain to lead to greater challenges forthe industry to remain in compliance, will drive up cost ofcompliance programs and will be a major challenge for the industrygoing forward.”

For example, the industry is watching for the report from theFederal Insurance Office (FIO), which is 19 months overdue.

“What will the FIO report say, and will it suggest greaterinvolvement by the federal government in insurance regulation goingforward?” Mills asked.

Mills said that for life insurers, there is currently “a verychallenging regulatory environment.”

At the state level, there are ongoing investigations aboutunclaimed property, use of captives and the ongoing issue ofprinciples-based reserving, or PBR.

“That is something that has been working through the NAIC for anumber of years,” he said. “It is aimed at providing greaterflexibility in capital requirements.”

At the same time, Mills said the use of PBR is “in questionbecause New York and California are questioning whether they wantto accept PBRs, and the NAIC is currently debating whether toapprove a model act regarding PBRs.”