The chief executive of Friends Provident today said the collapse of life assurers' share prices amid fears over their solvency was irrational.

Shares in the sector have fallen sharply amid concerns it may be the next to be hit by the credit crunch.

Critics say life assurers' financial strength is reliant on the value of their investments in equities. As those have fallen foul to the stock market meltdown, the argument goes, their solvency levels will be affected just like the banks.

But Trevor Matthews of Friends Provident said: "What is going on here is some sort of panic."

He said banks had been caught out by the practice of funding long-term loans with money borrowed short term on the money markets.

"Life companies are not like that. They are long-term savings institutions. They have plenty of liquidity and lots of cash on hand. People should not be worried about life companies," he told the BBC.

Much of the panic has been sparked by the crisis at US insurer AIG which lost billions of dollars on products that pay out if businesses default on loan repayments.

"We don't do any of that," said Matthews. "We are just boring life and pension companies."

He said Friends Provident had sold a lot of its equities portfolio prior to the decline in stock markets and was somewhat insulated from the fall.