WASHINGTON—Property/casualty insurance groups are reiterating their position that a final rule regarding systemically risky financial institutions approved by the Financial Stability Oversight Committee should not apply to their industry.

The rule, which was approved Tuesday by the FSOC, details the analysis and process that the FSOC intends to use when determining which nonbank financial companies should be subject to enhanced prudential standards and to supervision by the Board of Governors of the Federal Reserve System.

Property/casualty insurers have argued that they do not present the type of systemic risk to the economy that the rule is designed to control.

“To the extent that the final rule is similar to the proposed rule from October of last year, the Financial Stability Oversight Council seems properly focused on the type of institutions which experienced the most difficulty during the financial crisis,” Jimi Grande, senior vp in the National Assn. of Mutual Insurance Cos.' Washington office, said in a statement.

“As the FSOC moves into the process of designating those ‘systemically important financial institutions,' we believe the criteria approved by the council today will reaffirm the argument made by NAMIC and others since the crisis began that traditional property/casualty insurers pose no broader threat to our economic stability," Mr. Grande said.

“By incorporating risk-related metrics in the process, the final rule reflects improvement over the first proposed rule,” J. Stephen Zielezienski, senior vp and general counsel for the Washington-based American Insurance Assn., said in a statement. “AIA hopes that the council will use the designation sparingly and apply it only to the companies that pose a systemic threat to U.S. financial stability.”

With proper application of the rule, the FSOC should conclude that “property/casualty insurers are not the types of companies that should be subjected to heightened prudential supervision,” he added. “The industry business model, the supporting regulatory architecture, the large number of competitors, and conservative management and investment practices employed in the property/casualty insurance industry help reinforce that conclusion.”

The FSOC rule “takes important steps to recognize that traditional home, auto and business insurance activities are not systemically important,” Ben McKay, senior vp in the Property Casualty Insurers Assn. of America’s Washington office, said in a statement. “The Dodd-Frank Act appropriately treated insurance very differently than other sectors of the financial services industry, and recognized the strong consumer protections currently provided by the state insurance regulatory and guaranty fund system.” The final rule uses objective measurements that he said will “help minimize reliance on subjective criteria.”

“Property/casualty insurers are not highly leveraged or interconnected and have a fundamentally different business model than banks, a fact that warrants different regulatory treatment,” Mr. McKay said.