Insurers Aviva and Aegon have sought to reassure investors over their capital levels following share price falls across the insurance sector in the midst of the banking crisis.

Insurers Aviva and Aegon have sought to reassure investors over their capital levels following share price falls across the insurance sector in the midst of the banking crisis.

Aviva's market value rose by 6% yesterday after it said it had shored up its surplus capital levels by £100m since June, and toughened up its hedging strategy to minimise the impact of anticipated market falls.

At the end of July, Aviva said a 40% crash in the equity markets would reduce its surplus capital by £1.3bn.

The FTSE-100 has in fact plunged by more than 23% since then, and weekend reports suggested that implied a 30% fall in capital levels at the insurer.

But Aviva said its surplus capital had in fact increased from £1.8bn to £1.9bn. It has also strengthened its hedging strategy to ensure that even if equity markets fall by 40% from here, surplus capital would only be reduced by £700m.

Andrew Moss, chief executive, said: "Our active capital management ensures the group remains robust in the face of the current economic adversity, providing security for our customers and investors alike, and ensuring that the group is well positioned as confidence returns."

Meanwhile, Aegon, which employs 3000 at its UK headquarters in Edinburgh, has accelerated a £315m securitisation plan to boost its capital, as it admitted to credit writedowns of £333m in the past quarter.

Aegon group chief executive Alex Wynaendts sought to differentiate his firm from the toxic lending strategies of banks, telling investors at a conference that Aegon was using its life and pensions premiums to invest in "long term" assets.

He added: "In the current extraordinary environment, I am more convinced than ever that our strategy is the right one for Aegon."

He said Aegon would accelerate its programme of risk reduction and capital release after suffering credit write-downs which were expected to reduce third-quarter net income by £275m. In addition, the group will reduce its exposure to equity and credit markets, lower interest rate risks and step up its hedging programme.

Both firms have arranged meetings with analysts and investors, following fears that the banking crisis was starting to seep into the capital stability of insurers, widely regarded to be the more sensible financial stablemates of banks.

Standard Life's shares fell 6%, or 15p, yesterday to 241.5p but have remained remarkably steady over the past two months, trading in a relatively narrow range since Standard's last update on August 5.

It said then that its surplus of £3.5bn would fall by only £100m if equity markets slumped by 20%, while a 30% crash would reduce it to £2.5bn and a 40% slide to £1.9bn.

Prudential was off 2.25p at 422.5p but Friends Provident rose 4p to 85p.