Critics of the way the Financial Stability Oversight Council designates nonbank financial entities as systemically important financial institutions are welcoming Congress' apparently greater interest in how the council operates.

Insurers have long held that they do not constitute a systemic threat to the U.S. economy and therefore should not be considered as SIFIs.

But three insurers — American International Group Inc., Prudential Financial Inc. and MetLife Inc. — have already been designated SIFIs by the council, which was established by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which has been under increasing congressional scrutiny.

The SIFI designation involves considerably more than semantics: Nonbank financial institutions designated as SIFIs are subject to enhanced regulation by the Federal Reserve. Insurers have complained that this forces them to comply with bank-focused regulations that don't apply to the business of insurance.

MetLife has taken the federal government to court over its SIFI designation.

One of insurers' chief complaints is that the FSOC does not provide an “off-ramp” for insurers designated as SIFIs.

Sen. Mike Crapo, R-Idaho, shared that concern as he chaired a late-April hearing of the Senate Banking Committee's Subcommittee on Securities, Insurance and Investment on insurer capital rules and the FSOC process.

Sen. Crapo said a report he requested from the Government Accountability Office last year noted the transparency and accountability in the FSOC's SIFI designation process needed to be improved. He called for more transparency and establishing an off-ramp for insurers, a sentiment shared by the subcommittee's ranking member, Sen. Mark Warner, D-Va.

Insurance industry observers were impressed with what they heard.

There is a “clear interest” in greater transparency and the establishment of a clear off-ramp, said David Snyder, a Washington-based vice president at the Property Casualty Insurers Association of America. “I think there's growing interest in Congress.”

A “real strong foundation supports the state-based system” of insurance regulation, he added.

“I think there is renewed interest in revisiting FSOC and transparency and accountability surrounding the SIFI process,” said J. Stephen Zielezienski, senior vice president and general counsel of the American Insurance Association in Washington.

He added, though, that he doubted “there will be significant FSOC or Dodd-Frank reforms happening this year, but there is real interest in the designation process.”

Devising a rule to allow insurers to remove the SIFI designation is a long-term process, and Congress began paying greater attention when asset management companies “were under the microscope for designation,” Mr. Zielezienski said.

“There's a general feeling driving the need for accountability and transparency that SIFI still equals "too big to fail,'” he said.

“It's like the "Hotel California.' Once you're trapped in there, you can never leave,” he said in citing the 1977 Eagles song. “There's got to be a path to de-designation.”

PCI's Mr. Snyder noted that international organizations such as the International Association of Insurance Supervisors also are designating insurers that present a systemic risk. There's particular concern “about the closed-door cultures” of some of the international organizations and concern that state-based insurance regulatory standards may be eroded by their efforts.

“The real focus is on transparency, because it results in better outcomes and is a more inclusive process,” he said.