The government's decision to put Railtrack into administration is not expected to have a significant short-term impact on its insurers.

A spokesman for administrators Ernst & Young, Rayner Peett, said the government had provided funding to ensure the continued operation of the rail network.

"Insurance is key to that continuation of operation. Suppliers will continue to be paid," he said.

He added the company was likely to be in administration for several months and it was too early to say what would happen to its insurance agreements after a solution to its problems had been agreed.

AIG confirmed it insured certain classes of Railtrack's business, but declined to comment on the impact of its demise.

Meanwhile, it is thought the general insurers who were exposed to the firm as shareholders will not be severely affected.

CGNU, through its Morley Fund Management, was one of the largest shareholders with a 4% stake in Railtrack. Legal & General owned 2.5%.

An analyst said insurers were exposed to Railtrack only through their asset management arms. He said this indirect exposure would hurt the value of their investment funds, but not their technical reserves. "You take a hit in performance this year, but it's not something that will destroy your reputation."

As Insurance Times went to press, the board of Railtrack was attempting to free £350m of assets frozen by the government.