(AP Photo/Pablo Martinez Monsivais)

The Financial Stability Oversight Council will vote Tuesday on the factors it will use in determining whether an insurer is “systemically significant,” climaxing a regulatory process that has been underway since the fall of 2010.

A proposal was first published for comment in January 2011, but re-proposed last Sept. 11th under intense pressure from industry as well as members of Congress.

Industry officials were guarded in their comments, and the ACLI said it would not comment until it saw the final document.

However, one industry official acknowledged that the industry was caught “off guard” by the announcement of Tuesday’s meeting, scheduled for 2 p.m.

The industry contended that the initial proposal did not take into account the differences between banks – the primary concern of the FSOC – and non-bank financial providers such as insurers.

Moreover, the industry and its congressional supporters wanted the regulation to be more specific in disclosing the qualitative and quantitative standards that will be used in determining whether an institution is systemically significant.

Analysts are also weighing in.

In a investment note late last year, John Nadel of Sterne Agee, New York said that if the proposal doesn’t address the differences between banks and insurers measuring the risks and appropriate capital levels for life insurers using bank regulatory capital standards “would essentially ignore the business models and create a completely uneven competitive environment within the life insurance industry for those designated nonbank covered companies and those excluded from the Fed’s purview.”

Nadel added that if the same standards are adopted for insurers designated as SIFI as those banks with the same designation, it would lead to “celebrations” at companies like New York Life and Massachusetts Mutual “if key competitors such as MetLife and Prudential simply can no longer price competitively in certain product lines because their capital requirements are higher for the same risk.”

Specifically, Nadel said the proposed counterparty exposure limits are of particular concern.

He said that based in a proposal published for comment by the Fed last year, insurers designated as systemically significant would be subject to the same capital standards as banks under a proposed framework.

 For example, he said that counterparty limits the proposal would impose could make insurers designated as Systemically Important Financial Institutions (SIFI) in key business areas, like the sale of variable annuities. He also cited limits on credit exposures that could make life insurance SIFIs non-competitive with their non-SIFI life insurer counterparts.

The American Council of Life Insurers declined comment.

But, in a comment letter last December, ACLI officials said that a careful analysis by the FSOC will show that the traditional, core activities of life insurance companies do not present systemic risk.”