Former regulators and legislators have created a new committee aimed at putting pressure on Washington officials to continue focusing on statutes aimed at reducing systemic risk in financial markets.

The new independent, nonpartisan Systemic Risk Council will be headed by Sheila Bair, former chair of the Federal Deposit Insurance Corp.

Its purpose:  to “monitor and encourage regulatory reform of U.S. capital markets, with a focus on systemic risk,” the group says in a statement.

The Systemic Risk Council is comprised of a diverse group of experts in investments, capital markets and securities regulation, including senior advisor Paul Volcker, former chairman of the Federal Reserve.

“Despite the magnitude of the financial crisis, prospects for the major reform of regulatory systems are inadequate and vague,” the group said in announcing its creation. The council will hold its first meeting in Washington, D.C. later this month.

According to Bair, concerns over the slow progress of regulators and standard-setters prompted the council’s creation. The group will monitor and evaluate the activities of those committees with the congressional mandate to develop and implement Dodd-Frank provisions related to systemic risk, including the Financial Stability Oversight Council (FSOC) and the Office of Financial Research (OFR).

“The great challenge is to devise a system to identify risks that threaten market stability before they become a danger to the general public,” says Bair, who is also a senior advisor to the Pew Charitable Trusts.

“As evidenced by the 2008 crisis and even recent headlines, we need a more effective and efficient early-warning system to detect issues that jeopardize the functioning of U.S. financial markets before they disrupt credit flows to the real economy,” Bair adds. “And two of the most critical tasks are how to impose greater market discipline on excess risk-taking; and effectively ending the doctrine ‘too big to fail.’”

Insurance regulation was not cited as the reason the group was forming the new panel.

But the insurance industry has put great pressure on the Obama administration through members of Congress to thwart efforts by the FSOC and the OFR to increase federal oversight of state-regulated insurance companies.

Those agencies were created by the Dodd-Frank financial-services reform law to monitor risks created, for example, by the problems at American International Group.

In comments following publication of a final rule the FSOC will use in evaluating whether an institution should be cited as “systemically significant,” insurance industry officials said no insurers should be so designated.

J. Stephen Zielezienski, the American Insurance Association’s general counsel, says the AIA believes P&C insurers should be screened out of the systemically important financial institutions (SIFI) designation: “AIA hopes that [the FSOC] will use the designation sparingly and apply it only to the companies that pose a systemic threat to U.S. financial stability.”

“The final FSOC rule takes important steps to recognize that traditional home, auto and business-insurance activities are not systemically important,” Ben McKay, senior vice president of federal government relations for the Property Casualty Insurers Association of America, adds in a statement.

Last November, a subcommittee of the House Financial Services Committee held a hearing on three proposals by state legislators that would have limited the authority of the FSOC to examine insurance companies.

The three bills supported by state regulators would, respectively, revoke the authority of the Federal Insurance Office and the OFR within the Treasury to subpoena information from insurance companies; “explicitly and entirely” exclude insurance companies, including mutual insurance-holding companies, from the Federal Deposit Insurance Corp.’s “orderly liquidation authority” for troubled large nonbanks; and “preclude” the Federal Reserve from establishing higher prudential financial standards for troubled insurance companies it would oversee as ordered by the FSOC.

In a letter sent to the committee, officials of the National Association of Mutual Insurance Companies (NAMIC) say it is “unnecessary for property and casualty insurance companies to be overseen by the FSOC as potentially systemically significant” and that Congress should move to take away that authority.

NAMIC says passage of the three bills sought by state regulators that would severely roll back federal authority to oversee insurance companies should only be the start of legislative action to curb federal oversight of insurance companies.

Charles Chamness, NAMIC’s president and CEO, says in the letter that the three legislative proposals to be considered “represent an excellent first step toward bringing much-needed certainty to insurance markets” but stresses the prevention of new and unnecessary regulation of insurers by the FSOC.