LONDON, Oct. 6 (Reuters)—European insurers are financially robust and unlikely to require injections of fresh capital, barring an Italian sovereign default or break-up of the single currency area, analysts said.

European insurance stocks have on average lost a third of their value since February, partly reflecting fears insurers could be forced to raise cash to offset impairments on their government bond holdings as the eurozone crisis deepens.

This week's state bailout of Franco-Belgian lender Dexia , laid low in part by heavy exposure to distressed Greek debt, has stirred memories of the 2008 crisis, when some insurers had to be propped up by the taxpayer alongside big chunks of the banking sector.

But the insurance industry, having spent the last three years bolstering and de-risking its capital base, and immune from the drying-up of wholesale credit that is weighing on the banks, is at present unlikely to run out of cash, analysts say.

"Investment leverage is high and the market is concerned that they'll have to raise capital as eurozone issues deteriorate," said Jefferies International analyst James Shuck.

"The downside is potentially significant but the probability is small – there are no specific worries among any of the quoted players at this stage."

Shuck and rival insurance analyst Barrie Cornes of Panmure Gordon published research this week downplaying the likelihood that, respectively, Axa and Aviva would need to raise additional capital.

"There's a whole raft of reasons why it's very unlikely," Cornes said.

ITALIAN THREAT

Worries over the insurers have moved on from Greek debt, mostly held in manageable volumes, and now centre on their substantial investment in Italian bonds, seen as increasingly risky after Italy's stretched finances prompted two recent downgrades to its credit rating.

According to research by Barclays Capital, twenty-one top European insurers had 151 billion euros ($202.4 billion) of gross exposure to Italian sovereign debt in June, against just 8.5 billion euros of Greek government bonds.

"Holdings of Italian bonds have been a big concern" said Tony Silverman, equity analyst at S&P Capital IQ.

"Greece can come and go, perhaps with some exceptions in the banking sector, but I'm not aware of it being a game changer for any of the larger insurers."

However, sector-watchers reckon regulators and credit rating agencies alike are ready to accommodate insurers who find themselves hamstrung by their holdings of Italian debt.

Credit agencies have kept unchanged their stance on Italian insurers, where much Italian sovereign debt is concentrated, despite the downgrades to Italy's own credit rating.

And Italy's ISVAP regulator last week relaxed rules on what proportion of losses on government bonds insurers must take into account when calculating their solvency ratio, boosting shares in motor insurer Fondiaria-SAI .

"The noise that the rating agencies and regulators have been making is supportive and positive for the sector," said Jean-Francois Tremblay, insurance analyst at RBC Capital Markets.

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