Insurers will not be allowed to participate in a major federal government bailout program for financial institutions, a top Treasury official said today.

Only federally regulated financial institutions will be eligible for the Treasury Department’s Capital Purchase Program, according to the official, who cannot be identified by name due to ground rules established by the agency.

But insurers will be allowed to participate in a new program that will allow financial institutions to sell troubled assets to the private market with government guarantees, the official said.

“We believe insurance companies will benefit if the steps we are taking will lead to stability in the financial markets,” the official siad.

The comments were made at a background briefing for media after Treasury Secretary Timothy Geithner unveiled the Obama administration’s financial stability plan.

The CPP will exclude all insurers that had applied for aid, including those that already owned bank or thrift holding companies and those that recently had received to become thrift or bank holding companies, the official said.

“No insurance companies will be allowed to participate,” the official said. “Only federally regulated institutions will be allowed to participate in the Capital Purchase Program” under the Troubled Asset Relief Program established by the Emergency Economic Stabilization Act.

Apparently, insurers cannot use the CPP because federal regulators would not be able to conduct the comprehensive “stress test” that would be a prerequisite to financial institutions being eligible for a so-called “capital buffer.”

Geithner said earlier that this “comprehensive stress test” will involve a “coordinated review process” conducted by federal banking and securities regulators.

The stress test will be required for all banking institutions with assets in excess of $100 billion that seek to be eligible for funds under the new program.

The “capital buffer” program would help troubled banks, thrifts and securities firms absorb losses caused by bad loans and investments “and serve as a bridge to receiving increase private capital,” Geithner said.