LONDON, Nov 11 (Reuters) – European insurers, on the front line of the region's sovereign debt crisis because of their big exposure to distressed Italian bonds, will be forced to share losses with customers and rely on regulators to be lenient if Italy reneges on its debt.

Doubts over Italy's ability to service its loans this week pushed the yield on its bonds to levels seen as unsustainable, stirring fears the world's third-biggest debtor might default, and casting a long shadow over the insurance sector.

Leading insurers held about 151 billion euros ($205 billion) of Italian government bonds, Barclays Capital said in June, dwarfing their 8.5 billion euro exposure to bailed-out Greece, so far the biggest casualty of the sovereign debt crisis.

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