The earthquake in Japan caused insured losses of $12 billion to $25 billion, making it one of the costliest natural disasters in history for global insurers, according to risk modeling firm Eqecat.

Eqecat's Wednesday estimate -- which includes the earthquake, the subsequent tsunami and a series of fires -- is sharply lower than that of competitor AIR Worldwide, which has estimated losses of $15 billion to $35 billion, excluding the effects of the tsunami.

The discrepancy points to the difficulty in assessing the disaster last Friday, which scientists say was much more intense than they had ever modeled for in that part of Japan.

This narrows the range and brings the top end down a bit (compared with AIR). It doesn't feel out of kilter with what we've been hearing, said Joanna Parsons, insurance analyst at Royal Bank of Scotland in London.

Insurance shares around the world have been under pressure for days as skittish investors sell on the possibility that some insurers or reinsurers may have to cut share buybacks or raise capital to offset losses.

S&P insurance shares were down 2.1 percent in afternoon trade, in line with the decline in the broader market.

The carriers considered most affected include Prudential, MetLife, AIG, ACE and Aflac, as well as top global reinsurers Swiss Re, Munich Re and Hannover Re.

Standard & Poor's said in a statement that most insurers were dealing with the disaster from a position of capital strength, so it did not expect widespread credit ratings actions to follow.

The biggest vulnerability lies with Japanese domestic property insurers, S&P said.

NO HARD MARKET

Most analysts do not think the losses will be high enough to stem years of price declines in the property insurance market. They say a much larger event would be necessary to create a so-called hard market where prices firm up.

Overall, we expect pockets of price hardening as a result of the recent events but do not expect a broad hard market to result, KBW analyst Cliff Gallant said in a note Wednesday, issued before the Eqecat estimate.

We view that the guessing game of who has the worst loss is hard to win. Rather, we would take advantage of the volatility to buy quality companies with well-diversified books of business and strong balance sheets, he said.

The full extent of the destruction is slowly becoming clearer as rescuers comb through the tsunami-torn region north of Tokyo, where officials say at least 10,000 people were killed.

Fears over the Fukushima nuclear reactors added to the scope of the disaster.

While insurers have relatively little exposure to the property damage caused by the explosions and radiation releases at the reactors, there are still open questions about how life and disability insurers will be forced to deal with the injured in the years to come.

(Additional writing by Franklin Paul; Editing by Tim Dobbyn, Steve Orlofsky and John Wallace)

Japan Quake