NEW YORK (Bloomberg) - XL Capital Ltd. and Lincoln National Corp. led insurers higher on speculation the US plan to inject liquidity into the mortgage market will boost investment portfolios across the industry.

The Obama administration unveiled its long-awaited plan to remove toxic assets from the books of the country's banks by facilitating as much as $1 trillion in purchases of devalued real-estate assets. Plummeting prices in the market for mortgage-backed securities depleted the resources that insurance companies hold to pay claims and raised concerns that carriers would need to raise capital.

Carriers "could benefit indirectly" from Treasury's plan to help investors buy distressed securities from banks, said Alan Rambaldini, an life insurance equity analyst at Morningstar Inc. in Chicago. "If the programme raises the market for these assets and gets higher bids, that's going to help the life insurers because they hold a lot of those securitised products," he said.

Hartford, based in the Connecticut city of the same name, is down 43 percent this year, while Newark, New Jersey-based Prudential has declined 30 percent. Lincoln has fallen 49 percent since December 31. XL, the Bermuda-based business insurer is up 54 percent this year after declining 93 percent in 2008.

North American insurers have reported writedowns and unrealised losses tied to the meltdown of the sub-prime property market of more than $190 billion since 2007, according to Bloomberg data. American International Group Inc., the insurer taken over by the government in September, had about $87 billion of those losses, while MetLife Inc., the No.1 US life insurer, had more than $12 billion. Prudential accounted for $9 billion.

Life insurers, which have been hit harder than property-casualty carriers, have cut jobs, reduced staff and applied for government aid. Moody's Investors Service estimated that the industry lost $32 billion in capital and surplus last year.

The Treasury's announcement is the latest in a series of government attempts to end the worst financial crisis in seven decades; the Bush administration abandoned an earlier plan to buy the toxic securities in November. Obama officials still have to pick private asset managers and banks have yet to commit to selling their illiquid investments.

"If this was the first time out of the gates that we're trying to do this I'd be more optimistic," said Randy Binner, an insurance analyst for Friedman Billings Ramsey Group Inc. Mr. Binner said clearing toxic assets from the balance sheets of financial companies, "is the issue. It's just difficult".