Though it will take weeks or longer to determine how much was actually lost in the Japanese earthquake and tsunami, investors sold insurance shares on Monday in fear of how high the total will go.

At least one set of experts pegged the insured loss as high as $35 billion just from the earthquake and subsequent fires -- to say nothing of tsunami damage that will surely add to the figure. Some financial analysts said the figure should be lower but still substantial.

Insurance indexes in both the United States and Europe underperformed the broader market. Shares of carriers with specific exposure to the market like MetLife Inc, American International Group Inc and Aflac Inc, fell, as did those of top global reinsurer Swiss Re and rivals Munich Re and Hannover Re.

Risk modeling agency AIR Worldwide said the earthquake, which struck northeastern Japan on Friday, could result in an insured loss of between $14.5 billion and $34.6 billion. The upper end of the estimate would make Friday's earthquake the second-costliest natural disaster for insurers in the last 40 years, behind 2005's Hurricane Katrina.

Risk modelers RMS and Eqecat, which along with AIR produce scientific estimates of the impact of natural disasters, are expected to issue their initial research in the next few days.

Given the nature of the destruction, combined with the ongoing recovery efforts and evacuation areas, it will take some time to estimate the damage, Swiss Re said.

Estimates of the overall cost of the multiple disasters exceeded $170 billion on Monday, and there are still questions about how the ongoing nuclear accident at the Fukushima reactors will affect losses.

NUCLEAR THREAT

Insurers said they did not expect to absorb the cost of earthquake-related damage to the nuclear power facility 240 kilometers north of Tokyo that has stirred fears of a leak of radioactive material across the region.

Any impacts due to major accidents in Japanese nuclear power plants will not significantly affect the private insurance industry, Munich Re said.

A person familiar with the situation said nuclear plants in Japan are covered by a domestic insurance pool, which excludes both earthquakes and tsunamis from its property and liability policies. That would suggest Fukushima operator Tokyo Electric Power Co or TEPCO may not be covered for the results of the accident.

But Chaucer Holdings Plc, one of the world's biggest insurers of nuclear risk, said it did not expect any big claims because the Japanese Nuclear Act of 1961 absolves nuclear plant operators of liability from damage caused by major natural disasters.

Shares of Chaucer, currently in takeover talks with private equity tycoon Guy Hands and other suitors, were up 2.8 percent, partly reversing an 8.5 percent fall on Friday.

One industry expert said it would have been hard for any insurer to predict this kind of loss when writing policies.

This was an unprecedented hazard level, said Gordon Woo, lead catastrophist for RMS. This was an extremely rare event and the consequences in terms of the tsunami.

PRICING POWER

Some analysts said the disaster, combined with heavy losses already suffered this year from floods in Australia and last month's New Zealand earthquake, could push up global insurance prices, boosting insurers' shares.

In our view the loss will be so large that it will probably provide the trigger to ensure a re-rating of the non-life sector, Panmure Gordon analyst Barrie Cornes wrote in a note.

Shares in the sector have been under pressure due to persistently weak global insurance prices, reflecting stiff competition between well-capitalized insurers. A big loss would erode insurers' capital, forcing them to charge more to recoup big payouts to customers.

Last year, analysts polled by Reuters said a natural catastrophe would need to cause an insured loss of more than $40 billion to lift prices across the market.

The earthquake is likely to slow some share buyback plans at large reinsurers but not create capital problems, Barclays Capital said in a note.

Ratings agency Fitch said it did not expect major downgrades to insurers' credit ratings as a result of the earthquake but warned that some reinsurers could miss current earnings expectations.

The hit will also be limited by a low take-up of insurance by Japanese households and businesses relative to Western countries, and by limited use of reinsurance by domestic Japanese companies.

These factors limited the financial impact on insurers after the 1995 Kobe earthquake to about $3 billion, a small fraction of the overall economic loss of $100 billion.

($1=.7177 Euro)

(Additional reporting by Katie Reid in Zurich, Maria Aspan in New York, and Rachel Chitra and Tanya Agarwal in Bangalore; Editing by Gerald E. McCormick and Steve Orlofsky)

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