Treasury Secretary Timothy Geithner testifies on Capitol Hill on before the Senate Banking Committee hearing on the the FSOC's annual report to Congress. (AP)

WASHINGTON—The Financial Stability Oversight Council will re-propose on Tuesday the guidelines it will use in determining that a non-bank such as an insurer is SIFI (a “systemically important financial institution”) and will therefore be subject to federal as well as state regulation.

The much-criticized proposal will be re-introduced when the FSOC will hold its first meeting with insurance expert Roy Woodall as a voting member and that the first item on the agenda will be, “Second notice of proposed rulemaking and guidance on the authority to require supervision and regulation of certain nonbank financial companies.”

And, in comments today before the Senate Banking Committee on the FSOC, Treasury Secretary Geithner said that, next week’s meeting will attempt to “give clarity” to the markets on how they designate SIFIs by adopting a framework.

He did not specify whether that meant that the FSOC will be asked to approve the re-proposal of the rule and guidance governing designation of non-banks as “SIFI.”

It is believed that the meeting was scheduled, and the SiFi issue put on the agenda, in anticipation that Geithner would receive questions on the SiFi issue regarding nonbanks as he testifies on the FSOC  before both the Senate banking panel and the House Financial Services Committee.

In comments on the issue, Blain Rethmeier, a spokesman for the American Insurance Assocation, said, “AIA will be tracking this meeting very closely. The rulemaking as it applies to nonbank financials is of primary interest to our association and having Mr. Woodall on the panel should add a new dynamic.”

Robert DeFillippo, chief communications office for Prudential, said in response to the FSOC announcement that Prudential “continues to be supportive of regulation that makes sense.” He said Prudential has been working with federal regulators to provide information on the insurance industry and the company, and looks forward to examining what the FSOC proposes.

Whit Cornman, a spokesman for the American Council of Life Insurers said that, “We understand that Treasury plans to re-propose the rules for designating non-bank financial entities as systemically important financial institutions. We look forward to reviewing a re-proposal once it has been issued and submitting comments as appropriate. We hope that any re-proposal provides greater clarity to the process for designating non-bank financial entities as SIFI.”

Jimi Grande, senior vice president for federal and political affairs for the National Association of Mutual Insurance Companies, said that, “NAMIC has argued since the financial crisis began that property/casualty insurance does not pose a systemic risk to the broader economy.”

Grande said that like many companies, property/casualty insurers have worked hard to weather the storm of the last few years, and as the FSOC Annual Report noted “withstood the financial crisis quite well in terms of providing insurance services to consumers and businesses.”

“Secretary Geithner’s testimony shows that the FSOC is rightly focusing their efforts on those segments of the economy that pose such a systemic risk, and we hope this will be seen in the framework for designating systemically important financial institutions the FSOC will be considering at their meeting next week,” Grande added.

Treasury Undersecretary Neal Wolin told the Senate Banking Committee in July that the SIFI proposal for non-banks would be re-proposed.

He did so after insurance industry officials contended in comment letters and other statements that the proposed rule was not specific enough as to the criteria that would be used in designating a non-bank as “SIFI.”

Such a designation would subject an insurer, for example, to oversight by the Federal Reserve Board, as well as impose new disclosure and capital requirements on an institution.

In his July remarks, Wolin said the new proposal will include “specific metrics that will help provide clarity on the FSOC’s evaluation of firms for potential designation.”

“The designation process will employ the judgment of the council’s members based on a comprehensive understanding of a firm’s risks,” Wolin said, adding that the proposed guidance will be issued for public comment in the near future.”

Wolin made the comments at the same time that Sen. Sherrod Brown, D-Ohio, and Sen. Pat Toomey, R-Pa., sent a letter to Geithner in which the lawmakers say they “remain concerned about the lack of clarity in the current rule proposed on SIFI designations.

“Specifically, it is important that the SIFI designation criteria involve clear benchmarks, so that firms have some ability to predict whether and when they will be deemed ‘systemically important’ in the eyes of the FSOC, as a SIFI designation will significantly affect any firm.” the letter said.