Page last updated at 22:00 GMT, Wednesday, 8 April 2009 23:00 UK

US insurers in line for state aid

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Other US insurers could follow AIG and receive government bail-outs

Some of the biggest insurance companies in the US may be in line for government bail-outs from existing funds set aside for the banking sector.

A US Treasury spokesperson said that a number of life insurance companies had met requirements for government aid.

Andrew Williams said help to insurers would not involve new funds, but would come from the $700bn (£477bn) Troubled Assets Relief Programme (Tarp).

Funds from the programme have been used to bail out insurance giant AIG.

However, until now, it had been seen as a special case.

'Consistent goals'

But following reports that the Treasury would extend the financial bail-out programme, known as Tarp and was passed last year, to insurance companies, Mr Williams said that certain insurers that had banking operations could qualify.

"There are a number of life insurers that have met requirements because of their bank holding company status.

"These are among the hundreds of financial institutions that will be reviewed and funded as appropriate," he said.

Frank Keating, boss of the American Council of Life Insurers, said: "As we have argued all along, allowing life insurers to participate in the programme would be consistent with its stated goals to increase the flow of financing to US businesses and stabilise the credit markets."

Life insurers have about $5.1tn in assets and are major holders of US corporate bonds, said Mr Keating.

They have lost huge amounts of money during the recession.

But some analysts warned that US government aid was not unlimited and those insurers that did not receive help would struggle to survive.

"It is fairly likely that we will see a few major life insurers that don't qualify for aid either fail or enter state receivership," said Kent Smetters at the University of Pennsylvania's Wharton School.

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