British insurance companies will not be bailed out by the United States,The Timeshas learnt. It is understood that, although Henry Paulson, the US Treasury Secretary, was prepared to listen to appeals for cash from British and American insurers, he is adamant that US bailout funds will go only to “federally regulated financial institutions that lend money”.

This excludes insurers such as Prudential, Friends Provident, Standard Life and Aviva, which have all suffered steep falls in their share prices this month despite giving reassurances about their capital strength.

British insurers have been under scrutiny by the Financial Services Authority, which believes they are paying too little consideration to an increased risk of corporate bond defaults. Traders are fearful of insurers’ exposure to companies failing to meet obligations.

Although Aviva and Prudential have formally denied any need to carry out a rights issue or raise fresh capital from existing shareholders, news that British insurers have sought US federal assistance is expected to undermine confidence in the insurance sector further.

The US Treasury is understood to have told UK and American insurers that there will be no plans to expand its capital purchase programme, under which international banks can apply to sell troubled assets and an equity stake to Washington.

Although Mr Paulson nationalised AIG, the world’s biggest insurer, last month at a cost of $84 billion (£53 billion) to the US taxpayer, he is understood to be at pains to emphasise that this bailout was an exception and that it did not open the door for other insurers to beg for rescue funds.

After putting in place increased hedges this summer, Aviva has a £1.9 billion buffer of regulatory capital. The company is expected to announce in a trading update tomorrow an 8 per cent increase in new life and pensions business, compared with the same time last year.

Standard Life, which is to give a trading update on Thursday, is expected to report a 3 per cent fall in inflows to its global life and pension business. Standard Life is generally seen as well capitalised, but an HSBC broker’s note last week said that it might have to fight hard to maintain its position in the self-invested personal pension market.

Aviva, Standard Life and Prudential declined to comment, while Friends Provident could not be contacted.

News of the insurers’ approach for emergency federal funds came as governments in Japan and the Middle East moved to prop up their financial markets and bail out troubled lenders.

Over the weekend, it emerged that Aegon, which employs 3,000 people in the UK through Scottish Equitable, was in talks with the Dutch Government about a bailout. There are also fears that the insurance business of ING, the Dutch banking group, may have to seek a bailout from the Netherlands’ €20 billion (£16 billion) fund.

In Tokyo, Mitsubishi UFJ Financial Group (MUFJ), Japan’s biggest bank, is preparing a 1 trillion yen (£6.8 billion) stock offer to try to shore up its capital.

The move comes as the Japanese Government is preparing to unveil market-calming measures, expected today. These may include a temporary ban on short-selling.

MUFJ’s ambitious move, which could end in failure if markets remain traumatised, comes amid signs of concern in Japan’s Government that policymakers have underestimated the harm unleashed by the credit crisis and the resulting crash in stock values.

Yesterday, it emerged that Tokyo was considering a fivefold increase in public funds set aside to bail out Japan’s banking system if need arises. Officials said the new fund would be worth Y10 trillion.

In signs that the global financial crisis has infected the Middle East, Saudi Arabia extended $2.67 billion in credit to low-income citizens and Kuwait’s central bank acted in support of Gulf Bank, which suffered losses from trading in currency derivatives after the dollar rose, prompting the Government to guarantee local bank deposits. Saudi Arabia said that it would deposit $2.67 billion into Saudi Credit bank, which lends, interest-free, to the needy.

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