SIZE SHOULD BE one of many factors and not the only factor considered when determining whether a financial services firm presents a systemic risk to the U.S. economy.

As we report on page 3, that is the conclusion of a report the Property Casualty Insurers Assn. of America is releasing today. The report, prepared for PCI by NERA Economic Consulting, finds that factors such as interconnectedness, liquidity risk and transparency must be taken into account when evaluating systemic risk.

Unfortunately, the financial services regulatory reform bill passed last year by the U.S. House sets asset size as the sole determining factor that a financial institution considered a systemic risk should be subject to assessments to prefund a “systemic dissolution fund.”

Property/casualty insurers rightly believe they shouldn't be subject to such a regime. They already are required to support state guaranty funds to cover insolvencies. Despite the experience of American International Group Inc.—the woes of which stemmed from a financial products unit, not P/C operations—one would be hard pressed to see how even the largest insurers would present a systemic economic risk. Using asset size as the sole factor in determining systemic risk might work for banks, but it doesn't for P/C insurers.

The Senate Banking, Housing and Urban Affairs Committee is about to tackle its version of financial services regulatory reform. We hope the panel heeds the PCI report and recognizes that while size matters, size alone cannot determine whether an insurer presents a systemic economic risk.