McRaith now chairs the group, the International Association of Insurance Supervisors' important technical committee but the G-SIIs will be chosen ultimately in consultation by the Financial Stability Board (FSB), which is coordinating the overall project to reduce the moral hazard posed by global systemically important financial institutions.

Several sources also noted that the "deliberate" and "complex" process involved also includes a mandated vote by the voting members members of the FSOC. Roy Woodall, the one insurance expert confirmed by the Senate has a vote. Missouri Insurance Commissioner John Huff and FIO's McRaith are the other nonvoting members of the FSOC steeped in the insurance sector. The FSOC consists of 10 voting members and 5 nonvoting members and brings together the expertise of federal financial regulators, state regulators, and the independent insurance expert appointed by the President.

The other nonvoting members, who serve in an advisory capacity, are the director of the Office of Financial Research; a state banking supervisor designated by the state banking supervisors; and a state securities commissioner(or officer performing like functions) designated by the state securities commissioners.

The state insurance commissioner, state banking supervisor, and state securities commissioner serve two-year terms.

At the same time, in comments Tuesday in Geneva that took place as the Treasury Department announced it was divesting the last of its AIG holdings, Robert Benmosche, president and CEO of AIG, said that large financial companies need a federal consolidated supervisor, but that supervision should be targeted and not blanket.

Benmosche, said that strong, consolidated oversight, including, for example, additional capital, "should focus only on those areas that raise concern about potential systemic risk."

That is necessary to "avoid comprehensive and costly requirements that do nothing to further promote stability," he said.

"Blanket increases in the amount of capital systemically important financial institutions need to hold will not necessarily make the banking system safer or the economy stronger," Benmosche explained.

"What is important is having the right capital in the right place; the issues AIG experienced were related to liquidity not capital."

"Pre-crisis, there was no single supervisor examining and regulating all aspects of AIG," he acknowledged.

Benmosche made his comments at the Geneva Association's Insurance and Finance Seminar at Lloyd's in London this week.

Similar comments were made in a letter to the Federal Reserve Board signed by 33 members of the House Financial Services Committee, both Democrats and Republicans, regarding consolidated regulation of insurers which operate savings and loans.

The Fed has come under fire for proposing regulations that would provide consolidated regulation of these institutions through use of Generally Accepted Accounting Principles instead of the Statutory Accounting Principles used by state regulators in overseeing operating subsidiaries of insurance holding companies.

"… for insurance companies not currently required to prepare financial statements using GAAP, a new mandate requiring additional statements using GAAP would be costly with no improvement in understanding the financial health of the insurance company," the letter said.

"The final rules should reflect and consider the unique insurance business model without undermining prudential supervision," the letter from the House FSC members said.

The letter asked that the Federal Reserve, including the regional banks, consult with the National Association of Insurance Commissioners "to design appropriate capital requirements specifically for insurance that complement existing state regulatory requirements," the letter said.

Also, the letter asked the Fed to forward to the committee a "written description of your development of capital standards for insurance companies thus far, including a description of the Fed's engagement with the NAIC and regional Fed banks."

In his comments at Geneva, Benmosche made the same point.

He highlighted the "robustness" of the existing regulatory framework employed by state and local insurance regulators, saying this was confirmed "by how traditional insurers fared through the crisis."

He also proposed that a global supervisory system specific to the holding company/insurance subsidiary model "should build on the proven success of that framework."

Correction: It was reported earlier that the Treasury Department would hold off designating AIG as a systemically important financial institution until after budget negotiations were completed.

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