UPDATE 5-Japan quake loss fears weigh on insurers

* Munich Re, Swiss Re, Hannover Re close 3.5- 4.3 pct lower * Loss provisionally seen at up to $15 bln - analysts

* Reinsurers could miss 2011 earnings forecasts - analysts

(Adds fresh analyst quote, detail, background)

By Simon Jessop and Jonathan Gould

LONDON/FRANKFURT, March 11 (Reuters) - A massive Japanese earthquake may have less of an impact on insurers than first feared, analysts said on Friday, although their reassuring estimates failed to prevent a slump in the industry's shares.

The quake off Japan's northeastern coast triggered a 10-metre tsunami that swept away ships, houses and farms and put Pacific basin countries on alert. [ID:nL3E7EB0MF]

The total insured loss could be up to $15 billion, equity analysts covering the industry said, enough to force some earnings misses, but not to inflict such serious financial hardship on the sector that it would have to put up its prices.

Last year, analysts polled by Reuters said a natural catastrophe would need to cause an insured loss of over $40 billion to lift prices across the market. [ID:nLDE66B09V]

Losses from the quake are not expected to be big enough to reverse a three-year decline in premium rates for most types of insurance, reflecting stiff competition between well-capitalised insurers.

"The very near-term reaction is that it's another annoying loss, but without any significant pricing impact on the other side of it," said Joy Ferneyhough of Espirito Santo bank in London, who said industry contacts she spoke to on Friday expect an insured loss of between $10 billion and $15 billion.

Analysts at stockbroker Jefferies International pencilled in a loss of $10 billion, while their counterparts at JP Morgan said the hit to European reinsurers could be as little as $1 billion to $2 billion.

WAIT AND SEE

The insurance impact of the quake will be mitigated by the Japanese state's role in picking up quake losses to households, while damage to businesses so far appears manageable, the analysts said, stressing their estimates were only preliminary.

The hit to insurers will also be limited by a low take-up of insurance by Japanese households and businesses relative to western countries, according to industry consultants Axco.

Insurers and reinsurance companies said it was too early to provide reliable forecasts of the quake's impact.

"It is absolutely impossible to give you any clue of what that would mean to us," Nikolaus von Bomhard, chief executive of Munich Re (MUVGn.DE), the world's No. 1 reinsurer, told an analyst conference.

Risk modelling firms are expected to publish initial estimates in the next few days, giving the first scientific guesses as to how the insurance sector will be affected.

Shares in the European insurance sector fell steeply, with reinsurers, which typically have the greatest exposure to major natural catastrophes, taking the brunt of the share price falls.

The top three global players -- Munich Re, Swiss Re RUKN.VX and Hannover Re (HNRGn.DE) -- closed down by between 3.5 and 4.3 percent, while the Stoxx 600 European insurance index .SXIP was off 2.2 percent.

In the United States, shares of insurers and reinsurers with actual or presumed exposure to Japan also fell, with Bermuda-based reinsurer Partner Re (PRE.N) down 2.7 percent by 12:42 EST. The broader S&P insurance index .GSPINSCwas up 0.2 percent.

Shares in Aflac Inc (AFL.N), a major foreign insurer in Japan, opened 2.6 percent lower but pared losses to trade down 0.5 percent after chief executive Daniel Amos said its financial exposure was "rather limited." [ID:nN11261049]

EARNINGS PRESSURE

Analysts said some reinsurers, which have already had to pick up the bill this year for flooding and cyclones in Australia as well as last month's earthquake in New Zealand, were now in danger of missing profit forecasts for the year.

"It is now a near-certainty that assuming normalised developments for the rest of the year, this will be another year of above-average nat-cat losses for reinsurers, and earnings downgrades would be likely for 2011," sector-watchers at Credit Suisse said in a research note.

Financial investors could lose millions in investments through catastrophe bond transactions with more than $1 billion in exposure to Japanese earthquakes.

Ratings agency Standard & Poor's on Friday said it had kept its ratings unchanged on six such catastrophe bonds, but that it was monitoring the situation.

Cat bonds are issued by reinsurers, such as Munich Re and Scor, seeking collateralised protection from investors, as opposed to the traditional reinsurance market. (Additional reporting by Ben Berkowitz in New York, Myles Neligan, Lorraine Turner and Tricia Wright in London, Christoph Steitz in Frankfurt, and Katie Reid in Zurich; Editing by David Cowell and Jane Merriman) ($1 = 0.7242 euro)