Sovereign wealth funds from China and Singapore have been lined up to fund Prudential's $35.5bn purchase of AIA, the Asian arm of AIG, in a move that could give state-backed investors a substantial stake in the region's biggest insurer.

The move is a sign that, after suffering big losses on their investments in western financial groups during the crisis, sovereign wealth funds are prepared to put their money to work in the sector, especially on deals in their core markets.

The participation of sovereign wealth funds in the acquisition of AIA would also entail a transfer of funds from state-backed Asian investors to US taxpayers, which stand to receive $25bn from AIG once the deal is completed. People close to the situation said Prudential and its advisers were in talks with sovereign funds from China and Singapore over the provision of billions of dollars to support a planned $20bn share sale by the UK group.