AVIVA is estimated to have seen at least 30% of its capital surplus wiped out by the collapse in global equity markets, amid mounting concerns that the woes of the credit crunch are spreading into the insurance sector.

The insurance giant warned in June that a 20% fall in equity markets would wipe £700m from its £1.8 billion capital buffer.

Since then the FTSE 100 has fallen by about 12%, while the Dow Jones Industrial Average has plunged about 10%.

Prudential has told its investors that a 20% fall in equities would knock 10%, or £140m, from its capital buffer.

Standard Life and Friends Provident have both said that market falls of this scale would knock 2% and 4% respectively from their solvency capital.

The equity-market falls have been coupled with huge potential losses to insurers from the collapse of banks such as Lehman Brothers, Washington Mutual and Bradford & Bingley – which wiped out bondholders as well as the value of the shares.

The pressure on insurers’ solvency margins comes as the industry braces for an epic bid battle over the remains of AIG.

The troubled US insurance giant launched a firesale of some of its assets on Friday.

Prudential is examining a bid for a stake in the group’s $20 billion (£11.3 billion) Asian life-insurance empire.

AIG’s UK life business is also up for sale, as part of the auction of Alico, the group’s $30 billion international insurance arm, which operates across Europe and Latin America.

Axa, Allianz, ING, Generali and Manulife are all thought to be looking at a possible deal. The asset-disposal programme needs to raise $85 billion to repay a two-year loan from the US government.

International Lease Finance Corp, the world’s largest aircraft-leasing company, is also up for sale.

Separately, it is understood that Equitable Life is close to announcing a preferred bidder for its remaining £7 billion of policies.

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