American International Group Inc. and Prudential Financial Inc. could become less competitive as a result of being designated systemically important financial institutions, though industry experts say much about the effect of SIFI status remains uncertain.

The Financial Stability Oversight Council earlier this month designated AIG, Prudential and General Electric Capital Corp. as the first nonbank SIFIs. But the Federal Reserve Board, which will regulate them, has not yet unveiled the financial and risk management standards it expects the companies to follow.

While those standards could reduce insurers' underwriting flexibility and increase compliance costs, they also may strengthen management discipline and improve insurers' financial positions, analysts say.

“There's a lot of uncertainty there” as the market awaits the standards, said James Auden, managing director of insurance for Fitch Ratings Inc. in Chicago.

How many more insurers may be designated also is an open question. MetLife Inc. is widely expected to be named a nonbank SIFI.

In a May research note, Fitch said FSOC is unlikely to consider U.S. units of foreign insurance groups to be systemically important since they are “materially smaller” than insurance giants such as AIG.

While FSOC has the authority to assess the systemic importance of foreign insurance groups with significant U.S. operations, it's unclear when or if it will do so, said Charles M. Horn, a partner at law firm Morrison & Foerster L.L.P. in Washington.

Mr. Horn added that the number of U.S.-based insurance SIFIs likely will be small.

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FSOC uses a three-stage analysis to determine whether a company should be named a nonbank SIFI. Once designated, a company must comply with “enhanced prudential standards” developed by the Federal Reserve. These will include requirements for risk-based capital, leverage and liquidity; limits on credit exposure to a single counterparty; and implementation of an enterprise risk management plan overseen by a chief risk officer and a board-level risk committee. Nonbank SIFIs also will undergo annual stress tests and must create “living wills” to ease windup if the company fails.

The Fed has not spelled out its standards for insurance SIFIs yet, and insurers are concerned that the standards will be “bank-centric” and inappropriate for insurance operations.

The effect of SIFI status on AIG and Prudential remains to be seen.

Fitch and Moody's Investors Service noted that if the Fed imposes much higher capital requirements, the insurers' ability to compete might be hampered.

“They would need to raise prices to meet return targets (or risk being less profitable),” Moody's analysts wrote in a June note.

Fitch's Mr. Auden agreed: “You could have competitors that are being more aggressive in pricing,” he said. “A SIFI would have less flexibility to do that.”

AIG CEO Robert Benmosche alluded to the point at a Deutsche Bank investor conference this month in New York. He jokingly complained that big competitors such as Berkshire Hathaway Inc., which recently hired several AIG executives as part of a push into the surplus lines market, are not considered SIFIs. “That's a little bit of a frustration,” he said.

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He conceded the technical challenges and cost of compliance with the prudential standards, but noted that AIG has faced such issues before.

“It's costly. But Sarbanes-Oxley was not so terrific, either. It was not a lot of fun going through that,” Mr. Benmosche said.

SIFI status may have benefits for insurers, Moody's noted, including greater risk management discipline and a greater likelihood of retaining earnings and capital.

Some observers, meanwhile, expect relatively little effect on AIG.

Fed standards may require an incremental capital increase, “but I don't think it will be tremendously onerous” for AIG, said Meyer Shields, managing director at Keefe, Bruyette & Woods in Baltimore. He said he would be surprised if AIG suffered any competitive disadvantage, explaining that its return on equity might be lower as a SIFI, but that its operations aren't likely to change much.

Analysts with Barclays Bank P.L.C. said AIG is best-positioned of the three nonbank SIFIs to adapt. Barclays cited AIG's substantial holding company liquidity and lower asset leverage, among other factors.

Overall, AIG is not nearly as risky a company as it was in 2008, when its near-collapse threatened the worldwide financial system, observers say. The insurer has shed most of its exposure to credit default swaps and other financial products that almost brought it down and has spun off noncore operations.

Nevertheless, “I don't think there's any way they could not be designated (a nonbank SIFI),” Mr. Shields said. “They're the poster child” for what went wrong in the financial crisis.