The country's biggest insurer, Met Life (MET), preemptively raised $2 billion in capital. The mere fact that it succeeded in that aim spurred the stock forward, making it one of the few winners on an otherwise abysmal day.

Analysts now fear mounting losses may force weaker hands to fold, as stronger firms gobble up smaller, less buoyant ones. Just as Wells Fargo (WFC) ultimately won out over Citi in the battle for Wachovia (WB), insurers with stronger balance sheets and more fervent risk aversion are likely to rise to the top.

It wasn't supposed to be like this.

Insurance companies, long believed to be safe and boring behemoths slothing their way through the dizzying world of highly rated debt, have been roiled by unprecedented dislocation in the credit markets. Taking in millions of tiny premiums each month, insurers invest that money in (supposedly) safe securities yielding low, but steady returns. The hope is that incoming cash flow offsets payouts on claims - and the firm gets to keep what's in the middle.

The Times notes that even as investment-grade debt has fallen in value this year, insurance companies have been loathe to write down their losses, hoping instead their investments would rise before year's end. But now that rolling over short-term funding is next to impossible, other assets must be sold to raise cash. Real losses on these sales are taking a toll.

Washington has its hands full trying to prop up the banking system, which sinks deeper into the abyss seemingly by the hour.

It's too early to know whether the insurance industry will be next in line for a government handout, but if the credit markets don't start to improve in short order, the queue in front of the Treasury Department's door could get a lot longer.