Insurers including Travelers Cos., Allianz SE and Zurich Insurance Group AG fell as the U.S. east coast prepared for Hurricane Sandy, which may cost the industry as much as $6.3 billion, according to Kinetic Analysis Corp.

Insurance was the worst-performing industry in the STOXX Europe 600 Index, down 1.5 percent compared with the index’s 0.4 percent decline at 2:14 p.m. in London. Allianz traded 1.1 percent lower at 92.91 euros, Zurich fell 2.6 percent and New York-based Travelers dropped 0.9 percent in European trading.

“It is heading for a region with huge population density,” Fabrizio Croce, a Zurich-based insurance analyst at Kepler Capital Markets, wrote in a note to clients today.

U.S. public officials from Virginia to Massachusetts have shut schools, halted travel and prevented stock markets from opening, disrupting the lives of as many as 60 million people, as the hurricane approaches. The storm, dubbed “Frankenstorm” by the National Weather Service, is predicted to make landfall late today in southern New Jersey then turn inland, according to the National Hurricane Center in Miami.

Allianz, which provides property/casualty coverage in the U.S. through its Fireman’s Fund Insurance Co. unit, and Zurich, which has a management relationship with Farmers Insurance, are among European insurers with most exposure to the U.S.

Allstate, Munich

Allstate Corp. fell 0.7 percent to $39.87 in European trading. Munich Re, the world’s biggest reinsurer, dropped 2.3 percent to 121.5 euros while Catlin Group Ltd. led Lloyd’s of London insurers lower, falling 3.3 percent to 457.6 pence.

Waves could reach six to 11 feet around the New York Harbor should the winds coincide with high tide, according to Risk Management Solutions, a catastrophe modeling firm used by insurers.

Losses from the storm may be as much as $6.3 billion with the biggest insurance claims in Pennsylvania, according to data from Kinetic Analysis Corp. compiled by Bloomberg. Hurricane Irene last year cost insurers $4.3 billion, according to data compiled by the Insurance Information Institute. Standard homeowners’ policies protect against wind damage, while losses from flooding aren’t covered, the trade group said.

Primary insurers such as such as Allstate and Travelers and Chubb Corp. are among the firms that have the largest market share in areas impacted by Sandy, Morgan Stanley analysts led by Greg Locraft said in a note to clients yesterday. Such primary insurers typically buy reinsurance from firms including Munich Re and Swiss Re to protect themselves against losses.

‘Well Prepared’

The property-casualty industry’s capital levels make it “well prepared to pay all Frankenstorm insured losses,’’ the Morgan Stanley analysts said.

Lloyd’s of London insurers such as Catlin sell both primary coverage and reinsurance.

European insurers’ capital reserves remain “fat” as they have not had to pay for any severe losses in 2012, according to Eamonn Flanagan, a Liverpool, England-based analyst at Shore Capital Group Ltd. Firms such as Beazley Plc, Hiscox Ltd. and Lancashire Holdings Ltd. may reduce planned capital returns to shareholders to pay for losses and take advantage of higher premium rates following the storm, he said.

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