Top insurers will have to hold more capital from 2019 to coverrisks they pose to the financial system should they go bust, globalregulators said July 18.

Regulators also released an initial list of nine insurers,including AIG and Allianz SE, that have been deemed globallysignificant and will likely have to meet the new requirements.

The announcement is a setback for a sector which argues that it,unlike banks, did not cause the financial crisis and shouldtherefore not be tarred with the same regulatory brush.

Yet the reform was called for by world leaders in the Group of20 top economies (G20) that have already approved a similar regimefor 28 of the world's top banks, also by 2019.

The G20 contends the insurance sector poses just the same sortof potential systemic risks as do the banks. Problems at AIG in2008 illustrated the threat, after the U.S.-based insurer had to bebailed out by the taxpayer in one of the biggest rescues followingthe credit crunch.

Under the plans set out by the International Association ofInsurance Supervisors (IAIS), insurers will be subject to toughersupervision and will have to show by 2015 how they can be wound upsmoothly in a crisis, without relying on taxpayer bailouts, thebody said in a statement.

Peter Braumueller, chairman of the IAIS executive committee,said the reforms had been tailored for insurers. Determining howmuch extra capital must be held will be done over two stages andwill take several factors into account.

The Financial Stability Board (FSB), the G20's regulatory taskforce, on Thursday published a list of insurers coming under thescope of the new rules. Reinsurers won't be named until July 2014as more time is needed to analyse them.

The firms named on Thursday were:

* Allianz SE

* American International Group Inc

* Assicurazioni Generali S.p.A.

* Aviva plc

* Axa S.A.

* MetLife Inc

* Ping An Insurance (Group) Company of China Ltd

* Prudential Financial Inc

* Prudential plc

SYSTEMICALLY IMPORTANT

The IAIS will develop by the end of 2014 a basic “backstop”capital requirement for insurers deemed to be globally systemicallyimportant insurers (GSIIs).

A second stage will calculate a bespoke capital requirementbased mainly on how much a company is plugged into the financialsector and if it has “non traditional” operations.

This refers to complex derivatives, extensive “repo” activitiesand securities lending, or whether a company offers some types ofannuities, mortgage insurance and credit guarantees.

Size alone and apparent global reach will only represent a smallpart of the capital calculation, the IAIS said.

Furthermore, insurers whose traditional lower-risk activitiesare clearly separated from riskier operations may not have to holdas much extra capital.

This will act as an incentive for some insurers to restructurethemselves, seeking to apply lessons from the $85 billion rescue ofAIG.

AIG's credit default swaps business, more traditionally abanking or hedge fund activity, turned sour in the financial crisisin 2008, leaving it open to huge liabilities.

The IAIS will come up with bespoke capital requirements for eachGSII by the end of 2015, to be complied with from 2019.

The list of GSIIs will be updated by the FSB every November.Insurers named in November 2017 will have to comply with the 2019deadline for holding extra capital.

FSB Chairman Mark Carney has said that some insurers may nothave to find extra capital as they will already hold enough to meettheir GSII requirement.

The IAIS will also work on a “quantitative capital standard” forthe insurance sector more broadly.