BOSTON -- In a move likely to aggravate the country's deepening real estate slump, many major insurance companies say they will sharply reduce or even halt their investment in commercial mortgages next year.

The trend could hurt banks, many of which are already mired in bad loans, and further tighten real estate credit.

Insurance companies often take over construction loans from banks and provide long-term financing once construction is completed and buildings are occupied.

One major insurer, Travelers Corp., which in the third quarter set aside a $650 million reserve for possible real estate losses, said it expects to do no such real estate investing in 1991.

The company did $1.3 billion in new real estate business in 1989. Those loans were overwhelmingly commercial mortgages and agricultural loans, Travelers spokesman Dan Kaferle said.

The nation's biggest insurance company, Prudential Insurance Co. of America, based in Newark, said it will slash its commercial loans by one-third in 1991 from this year in response to the troubled real estate environment.

The company, with consolidated assets of $165 billion, made $3 billion to $3.5 billion in such loans last year and has a commercial loan portfolio of about $22 billion, said James Longo, a spokesman.

"We're just going to be more selective," Longo said.

Also, Massachusetts Mutual Life Insurance Co. of Springfield, Mass., said it has declared a "moratorium" on new mortgage lending until returns turn up in that business. However, spokesman William Persch said Massachusetts Mutual would buy existing mortgages from other companies.

Although he could not immediately obtain the figure for 1990, Travelers's Kaferle said his company's new real estate business was lower this year as the company has tried to limit its involvement in the increasingly troubled real estate market.

The Hartford-based insurance giant's real estate investment portfolio is $17.3 billion, mostly commercial loans rather than directly owned properties, Kaferle said.

Another major participant in the national real estate market, Aetna Life & Casualty Co., also said it would reduce its real estate investment by an undisclosed amount next year.

"We're going to be a little more selective about the types of commercial projects we'll get involved in, and we've got less that we want to commit to such projects in the coming year," Aetna spokesman John Hawkins said.

Hawkins said the slump in real estate had resulted in a deterioration in the number and quality of projects Aetna could potentially invest in.

"We don't think the quality projects are out there as they have been in the past," Hawkins said.

Aetna's Aetna Life Insurance Co. subsidiary has about $19.6 billion invested in real estate, or about 51 percent of its total invested assets, Hawkins said. He said he could not estimate how much of that is done each year.