* New rules to be finalised in 2016, effective 2019
* Insurers may have to raise capital
* Big insurers say timetable tight
By Huw Jones
LONDON, Oct 9 (Reuters) - The world's top insurers could be forced to raise fresh capital under rules proposed by regulators on Wednesday, echoing measures imposed on the banks to try to avert the risk of another financial crisis.
The insurance industry say it wasn't to blame for the havoc resulting from reckless bank lending, yet events at AIG - which had to be rescued by the U.S. government in one of the biggest-ever bailouts - showed risks can lie outside the banking sector.
The insurance proposals include the first-ever global capital requirements for the sector and are designed to protect policyholders as well as limit risks to the broader financial system.
The move mirrors a global framework built over decades for banks and which has been toughened up since flaws were uncovered in the 2008 financial crisis.
The new insurance rules are being written by the International Association of Insurance Supervisors (IAIS), which represents nearly 140 countries, and will apply to roughly 50 top companies from the start of 2019.
The initiative has been sought by the G20 group of leading economies and its Financial Stability Board task force. The G20 pledged at the height of the financial crisis to leave no part of the global financial system unsupervised.
Yet insurers say they should not face same type of rules as banks. Insurers fear the same expensive fate.
The world's biggest banks have already raised billions of dollars in fresh capital - not just to meet rules imposed by the Basel committee which supervises the sector - and still have a $155 billion hole to fill to meet new capital rules by 2019.
The Geneva Association of 90 chief executives from top insurers and reinsurers questioned the IAIS deadline and noted rules for the bank sector had evolved over an extended period.
"Development and implementation of global capital standards within other financial service sectors have taken many years to develop," Secretary General John Fitzpatrick said.
The Global Federation of Insurance Associations, a trade body, said it wants more clarity and detail from the IAIS so it ends up with a standard that is workable for the industry.
"It is important that any capital standard reflects the nature of the insurance business and is not simply the adoption of a capital standard from another sector," it added.
The new standard will be finalised by the end 2016 and then tested before it takes effect two years later.
When the capital rules for banks were updated, lenders came under pressure from markets to comply early and even exceed the new minimums that don't come into force until 2019.
The announcement broadens the G20 initiative to increase supervision of the world's nine biggest insurers, including Generali, Allianz, Axa, Aviva and MetLife.
These globally systemically important insurers (GSIIs) will also form part of the 50 or so insurers that will have to comply with the new global capital rule from 2019.
Before then, the GSIIs must also comply with a temporary "backstop" capital requirement from late 2014, replaced with a permanent higher loss-absorbency rule from 2019 that will sit on top of the new capital rule.
The IAIS gave no indication of how many insurers may have to raise fresh capital or how much.