Floods in central Europe last month may cost insurance companies $3.5-4.5 billion, only half of one previous estimate but more than was paid out for the last major washout in 2002, the world's second biggest reinsurer said on Monday.

The forecast from Swiss Re compares to an earlier warning from a damage modeling agency that losses could top $8 billion. That, and its estimate of a $300 million hit for its own results, saw shares in Swiss Re and some other sector firms rise.

The flooding in early June forced Czech soldiers to erect metal barriers and pile up sandbags to protect Prague's historic center after days of heavy rains swelled rivers and forced evacuations from low-laying areas.

Emergency workers, soldiers and volunteers worked desperately to shore up flood defences in towns along the Danube and Elbe rivers as the high water moved downstream in the following days, with Germany among the worst-hit.

German insurance trade body GDV last week estimated the country's insurers could face damage claims of nearly 2 billion euros ($2.57 billion), slightly ahead of the 1.8 billion cost seen in the Elbe floods a decade ago.

Floods which drowned Prague's historic Old Town and other cities in water in 2002 cost insurers around $3.4 billion.

The world's biggest reinsurer, Munich Re, is due to publish its estimate of insurance industry and economic losses on Tuesday, in an overview of natural catastrophes in the first half of the year.

It will release a figure for its own share of the losses from the floods, which also hit towns in Austria, Hungary, Poland and Slovakia, with second quarter earnings data on Aug. 6.

Swiss Re said steps such as the mobile flood barriers used in Prague had helped spare many regions from substantial losses.

"Thanks to timely prevention measures, large areas have been saved from flooding," said Swiss Re's Group Chief Underwriting Officer Matthias Weber.

$8 BILLION

Reinsurers like Hannover, Munich Re and Swiss Re help insurance company customers cover the cost of major damage claims like hurricanes or earthquakes in exchange for part of the premium.

Earlier forecasts had resulted in far higher loss estimates, though industry observers caution that there are differences in what is included in the estimate, for example indirect costs such as relocation lodging or business interruption.

Catastrophe modelling firm AIR Worldwide had said insurance claims for flood damage in Germany alone may be as much as $8 billion.

Credit rating agency Fitch had put losses at up to 3 billion euros ($3.85 billion) in Germany, while Insurance broker Willis estimated claims of 4 billion euros in Europe.

Europe's biggest insurer, Allianz, has penciled in claims of 500 million euros from the floods across Europe, before passing on some costs to reinsurers.

Vontobel analyst Stefan Schuermann said the claims burden would pose little threat to Swiss Re's earnings and ability to pay a high dividend.

"This first major natural catastrophe loss event will impact second quarter results but year-to-date natural catastrophe claims remain well below budget having experienced virtually nothing in the first quarter," Schuermann said.

Shares in Swiss Re were trading up 1.2 percent at 71.10 Swiss francs by 0950 GMT, while the STOXX Europe 600 insurance index rose 1.9 percent.

Munich Re shares rose 2.4 percent.

Swiss Re reported a 21 percent rise in profit in the first quarter, driven by a rise in premium and fee income, low catastrophe losses and the expiry of a quota share agreement with Warren Buffett's Berkshire Hathaway.