If the downturn in the American housing market persists, then US borrowers with patchy credit records could bring considerable pain to European insurers.

It has emerged today, thanks to analysts at Sanford Bernstein, that Aegon and ING, the Dutch insurers, each have exposure of $4 billion to US sub-prime mortgage markets.

The UK-based Prudential is thought to be facing maximum losses of $200 million.

Most of their exposure will be in the form of investments in residential mortgage-backed securities, arcane vehicles consisting of pools of differently rated debt securities whose repayments are backed by home loans.

On the face of it, given that the collapse in housing market confidence has sent delinquency rates surging, it would be no surprise if the insurers were quaking in their boots.

Particulary as, only yesterday, Bear Stearns, the Wall Street bank renowned for structuring these often highly leveraged vehicles, told investors in two funds that their assets were virtually worthless.

In reality, they are less likely to be concerned.

As Bruno Paulson, the Bernstein analyst responsible for the research, points out, the chances of defaults being high enough to wipe out a slug of the insurers' investments are quite small.

In essence, different tranches in structured products such as this take it in turns to suffer losses, starting with the most lowly rated "junk" security and rising up to the top AAA-rated level.

ING and Aegon hold 92 per cent and 97 per cent of their sub-prime investments in the form of securities rated in the top zones, above AA.

Mr Paulson reckons that for them to be hit by losses, between 30 per cent and 40 per cent of mortgage-holders would have to default.

At present, default rates are below 10 per cent.

However, there is still danger. ING's 8 per cent holdings in the more at-risk securities still equate to $320 million.

For Aegon, the figure is about $75 million, although for the Pru it is negligible.

Clarity can only be good news for insurers whose share prices have been suffering from sub-prime exposure worries.

But the harsh truth is that until the American housing market reaches a floor, the exact losses are uncertain.

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