In broad strokes, the decision by the Treasury Department to extend TARP funds to life insurers is generally a beneficial initiative inasmuch as it takes the death-watch off the industry as a whole, and effectively puts a floor under valuations in the sector. All to the good.

But it’s also likely to go down as a move that offered more redemptive power to the weaker players in the insurance realm, without generally doing much more than affording a gesture of benevolence to stronger players, who might well opt to eschew the government’s offer.

A little moral hazard, there, anyone? Even putting aside - momentarily, and then in perpetuity - the bruised feelings that taxpayers might realize after finding out they’re on the hook for bailing out another private industry whose business was assessing risk that did a decidedly dubious job of executing on its primary function.

The market itself immediately sussed out which insurance providers looked to realize the most relief from the Treasury’s latest TARP expenditure, and which would see few real tangible outcomes from the initiative.

Shares of Hartford Financial Services (HIG) jumped about 12% in Friday’s early trading. Lincoln Financial (LNC) advanced about 10% as soon as the opening bell rang. The two are expected to split nearly $6 billion of the $22 billion that Treasury earmarked for insurers out of the remaining TARP allocation - $3.4 billion goes to Hartford, $2.5 billion to Lincoln.

On the other hand, Allstate (ALL) and Prudential (PRU) had no reaction in the early going.

The difference: Allstate and Prudential are regarded as stronger performers in the sector. And might be disinclined to accept TARP funds - the the government’s proven meddlesomeness that come with investments - especially given the dilutive effects that the capital infusion represented.

Furthermore, Allstate and Principal Financial (PFG) have tapped the markets for new capital. At most, they might be inclined to use the promise of a government infusion as something of a backstop if they needed to hit those markets once again for new funds. The better to be obliged to listen to shareholders and creditors than to politicians.

Meanwhile, for some of the still-struggling names in the sector, including Hartford and Lincoln, the Treasury’s move is akin to a put option on the life insurance business, according to Credit Suisse inasmuch as it removes some of the insolvency risk. (Curiously, does that mean taxpayers are guaranteeing coverage for life insurers that faced extinction?)

The one exigency to watch for, as identified by Oppenheimer in Friday’s research, is whether the life insurers receiving TARP funds that also offer property and casualty coverage - the P&C business having been largely insulated from the problems that life insurance operations have contended with - will use the government bailout as a lever to introduce pricing pressures into the business.