US stocks rose slightly in midmorning trading following the news, with the Dow Jones Industrial Average rising 1.43 points or 0.02 per cent, to 7,790.99 points.

The treasury department said last year that life insurers could be eligible for Tarp funds if they owned bank-holding companies.

Case by case

The move follows reports in the Wall Street Journal newspaper that the department had decided to extend bailout funds to several struggling life insurance companies, many of whom have been hit hard by the US economic recession and the subprime mortgage crisis.

Andrew Williams, a treasury department spokesman, said that US life insurance firms that met the initial requirements would be reviewed and funded as appropriate "on a rolling basis".

US insurance giant American International Group (AIG) is the biggest recipient of government bailout money so far.

However this is because its troubles stemmed from home mortgage-backed derivatives, which had soured and in turn partly sparked the US financial crisis.