Dutch insurance giant AEGON NV announced Tuesday that the government of the Netherlands will inject €3 billion (US$3.8 billion) into the firm to shore up its capital position.

For the transaction AEGON will issue 750 million non-voting securities at €4 per security to Vereniging AEGON. In turn, Vereniging AEGON will be funded on back-to-back terms and conditions by the Dutch State. AEGON expects the transaction to close before the end of November.

The firm said it believes that, “given today’s market levels and the ongoing uncertainty regarding the financial and economic environment, it is prudent at this time to reinforce its capital buffer to a level substantially in excess of its AA rating requirements.”It notes that the deal gives it security in the event that markets deteriorate significantly and flexibility to avoid excessive overcapitalization in the event that markets stabilize.

The firm also said that it will forego the final dividend for 2008, and it pre-announced a net loss for the quarter of approximately €350 million.

As part of the transaction, the Dutch state will nominate two representatives to the firm’s board. They will sit on AEGON’s audit, compensation and nominating committees, an their approval will be required for certain decisions, including share repurchases, changes to executive remuneration policies and any acquisitions or divestments with a value of one quarter or more of AEGON’s issued capital and reserves.

Additionally, all members of AEGON’s executive board will forego all variable income, either in cash, options or shares, relating to the performance in 2008 and limit exit-arrangements to a maximum of one year’s fixed salary.

Also in Europe, the Swedish Central Bank has granted an expanded credit facility of up to 5 billion kronas to Nordic investment bank Carnegie. Yesterday it said it would offer a SEK one billion credit facility, but it is now boosting that total.

The central bank said that the firm “is solid” but noted that it has difficulty gaining access to liquidity on the Swedish market.