Insurers issue "too big to fail" warning Insurers are conducting a war of words with regulators trying to prevent a repeat of AIG's collapse, as the industry makes a last-ditch effort to avoid capital surcharges. In a series of submissions to global supervisors seen by the Financial Times, insurers warn that plans to designate some of them as "too big to fail" are incoherent, impractical and simplistic. The industry is particularly concerned about the business areas regulators have included in a list of activities they consider "non-insurance," "non-traditional," or "semi-traditional." Regulators are planning to focus capital requirement increases on these operations and may force insurers deemed systemically important to sell them. Life assurers are so alarmed about the inclusion on the list of variable annuities - financial products that account for significant chunks of their business - that they have demanded regulators single out the topic and hold a dedicated meeting about it. The International Association of Insurance Supervisors has agreed to hold a meeting next month just to discuss variable annuities, people familiar with the matter said. The industry is also concerned about how other activities - notably third-party asset management, another vital contributor to company profits, and trade credit insurance - will be treated. In its submission, the trade body Insurance Europe complains that what regulators consider to be non-core business is "unnecessarily broad and incorporates a number of activities that do not pose a systemic risk." Martin Senn, chief executive of Zurich Insurance, said regulators" planned criteria "create a simple ranking of insurers, which is insufficient to address such a complex matter." Regulators are planning to compile a list of insurers they consider too big to fail in April. Up to 48 insurers may be included, although the IAIS has signalled that in practice the number will be "not too high." The Financial Stability Board has already imposed across-the-board capital surcharges on 28 of the largest banks after considering more than 70. But Charles Dallara, managing director of the Institute of International Finance, said regulators" proposals for insurance "borrow excessively from those developed for the banking sector without taking into proper consideration the unique characteristics of the insurance business model." The institute, whose members include about a dozen top insurers such as Met Life, Allianz and Ping An, called on the IAIS to undertake a "comprehensive study" to assess the impact of its proposals. The IAIS has held a consultation on the matter and the deadline for responses was Sunday. Peter Braumüller, who chairs the IAIS executive committee, said: "We will respond in due time and after careful consideration to comments raised in the public consultation and look forward to continuing our dialogue with the industry and other interested parties. The IAIS is committed to finalising proposed policy measures that take account of the particularities of the insurance industry while performing their intended goal of reducing moral hazard and the negative externalities that stem from the potential disorderly failure posed by a G-SII [globally systemically important institution].