WASHINGTON—Executives from competing property/casualty insurers sent a letter Friday to two senators expressing “grave concerns” about financial services regulatory reform legislation that could levy assessments on large insurance companies.

Senate Banking, Housing and Urban Affairs Committee Chairman Christopher Dodd, D-Conn., on Monday unveiled his latest proposal to overhaul financial services regulations and prevent or minimize damage from another financial crisis.

Among other initiatives, the legislation would create a $50 billion liquidation fund to pay for the resolution of large, interconnected financial companies that become insolvent. The fund would be financed through assessments on the nation’s largest financial firms, from which insurers would be excluded. Insurers already pay assessments to finance state guaranty funds that liquidate insolvent insurance companies.

But insurance industry leaders are concerned about a provision in the legislation that would allow federal authorities to seek assessments from additional sources, including insurers, should the fund become depleted after a crisis or another event.

“By assessing insurance companies that do not engage in activities that put U.S. financial stability at risk and that are already assessed through state guaranty funds to cover insured claims of their insolvent competitors, this approach…dilutes the bill's stated purpose of infusing greater caution into the behavior of those firms that present the greater risk of another crisis,” the Property & Casualty Leaders Coalition wrote in the letter to Sen. Dodd and Sen. Richard Shelby, R-Ala., the ranking Republican member of the committee.

The missive was signed by the CEOs of the ACE Group of Cos., Allstate Corp., CNA Financial Corp., Liberty Mutual Insurance Co., Nationwide Mutual Insurance Co., State Farm Insurance, Travelers Cos. Inc. and W.R. Berkley Corp., as well as by the CEO of Zurich Financial Services’ Americas division and the chief operating officer of Chubb Corp.

The letter also suggests that the cost of such assessments would be passed on to insurance buyers.

“With respect to our involvement in assessments, we remain unequivocal in our view that it is counter to the public policy underlying the legislation to force our companies and our customers to pay for the risky activity of highly leveraged and less regulated financial entities,” the letter said.

Observers say staff members of the Senate committee have said the additional assessments are unlikely to occur and that they wanted to err on the side of levying potential assessments on too many, rather than too few, sectors and firms.

The Senate Banking committee will begin marking up the legislation next week.