WASHINGTON (Bloomberg) Insurance companies are fighting the legacy of American International Group Inc as they seek to avoid being branded systemically risky and the extra supervision that comes with that designation.Lobbyists representing Prudential Financial Inc., Northbrook, Illinois-based Allstate Corp. and Berkshire Hathaway Inc’s Geico Corp say the business model for insurers has little in common with the high-risk derivatives and securities-lending operations that might have destroyed AIG if it weren’t for a $182 billion taxpayer-funded bailout.Their position may clash with the views of the Financial Stability Oversight Council, a group of regulators charged with preventing another financial crisis. The council’s staff suggested in a draft report in February that some insurers may warrant tougher oversight by the Federal Reserve because their failure could pose a threat to the financial system.“AIG stood alone, quite unique, relative to other insurance companies,” John Nadel, an analyst with Atlanta-based securities firm Sterne, Agee & Leach Inc, said in an interview. “I don’t think there’s a regulatory body in Washington that truly understands the unique elements, the arcane and esoteric elements of the insurance industry.”MetLife Inc will automatically be subject to increased supervision because it is a bank holding company with more than $50 billion in assets. “Enhanced standards” will be applied to its risk-based capital, liquidity, leverage, wind-down plan and concentration limits, the New York-based company said in its annual report in February.Regulators may ignore the industry’s pleas and designate a few insurers, including Prudential because of its size, Nadel said. Prudential, based in Newark, New Jersey, is the second- biggest US life insurer behind MetLife. Insurers are overseen largely by state regulators, and industry executives are concerned that Fed supervisors may be more intrusive without having experience overseeing the business.Representatives from the Property Casualty Insurers Association of America have met with officials from the Fed, Treasury, Federal Deposit Insurance Corp. and other agencies in an effort to convince regulators that insurers shouldn’t be treated like banks and pose no threat to financial stability, said David Sampson, the group’s chief executive officer.The group’s representatives went to the Commodity Futures Trading Commission on April 6 to make the case that the definition of derivatives shouldn’t include insurance products. The PCIA’s members include Boston-based Liberty Mutual Insurance Co and Mayfield Village, Ohio-based Progressive CorpFirms should be monitored to track their connections with other financial concerns, not on more isolated activities like a life insurance business, the American Council of Life Insurers wrote in a Feb. 25 letter to Treasury Secretary Timothy Geithner, the FSOC’s chairman. This includes firms that use derivatives for hedging rather than speculation, said Julie Spiezio, the group’s senior vice president.