Moody's went on to say that the "systemic importance of AIG will diminish over time as it unwinds or divests various noncore businesses."

AIG would not comment on the impact of such a designation.

But Evan Greenberg, CEO of ACE Ltd., said he doesn't have much confidence in a systemic regulator.

"When I look back at the [credit] crises and I look at the role that current regulators played or didn't play in recognizing accumulations of risk and bad underwriting in the credit business, it doesn't give me a whole lot of encouragement about how regulators will behave in the future," Mr. Greenberg said during a conference call to discuss the company's earnings.

Speaking to potential problems with regulating systemic risk, A.M. Best Co. said, "Questions abound as to the potential cost of regulating systemic risk for U.S. financial institutions; in particular, if other major countries do not follow the U.S. in controlling systemically important institutions and market utilities, the end result would be uneven regulation among different national systems."

The Role of the FIO

The act's establishment of a Federal Insurance Office (FIO) in the Treasury Department is meant to create a central point of insurance information and is expected to aid in negotiated covered agreements internationally, S&P said in its report.

The report added that the Dodd-Frank act is not expected to affect state regulation. "Regulation of the insurance sector remains almost entirely in the hands of the 50 state regulators," the report said.

Industry experts said the FIO has extremely narrow authority to preempt state regulation in international agreements. All the provisions in the act leave the FIO authority on international prudential insurance matters virtually meaningless, experts said.

However, S&P's report said the legislation is a "missed opportunity" for regulatory consolidation. The U.S. will still have "no fewer than eight principal federal financial regulators," S&P said.

U.S. reinsurers could be looking forward to high capital costs if international regulators look down upon the U.S. system, which would lead to more expansive reinsurance and reduced capacity, said S&P.

FIO Studies on Regulation

The FIO, which will have an advisory voice on the newly created Financial Stability Oversight Council, has been ordered to conduct a study on how to modernize and improve insurance regulation. "It remains to be seen what the recommendations will be and how they will affect the current regulatory system," S&P said.

"The [FIO] could be helpful in promoting more consistent regulation of U.S. and international insurers, which would support U.S. global competitiveness," Moody's said, but the dual state/federal regulation "could increase insurers' costs and be a drag on operating effectiveness."