Shares of Dutch insurers NN Group and Aegon fell as much as 10% in early trade while France's CNP Assurances fell 7%. British insurers - which still need to follow EU insurance regulation during the Brexit transition period - also fell with Aviva and M&G closing down more than 6%.

The European Insurance and Occupational Pensions Authority (EIOPA) said late on Thursday it was essential for insurers and reinsurers to hold a "robust level" of reserves to protect policyholders and absorb potential losses.

Last week the European Central Bank told banks to halt shareholder payouts, and most major euro zone lenders have done that.

However, insurers may put up more of a fight, and analysts at JPMorgan Cazenove said halting dividends would remove one of the sector?s main attractions.

MIXED MESSAGES

French regulator ACPR, part of the Bank of France, backed EIOPA, but its German counterpart BaFin - a member of EIOPA - said a general payout ban for insurers and pension funds was currently not necessary.

Germany's Allianz, the region's biggest insurer, told Reuters it was in "good shape" and wanted to maintain both its dividend for 2019 and a 1.5 billion euro ($1.6 billion) share buyback.

German reinsurer Munich Re, which declined to comment on the EIOPA statement, announced on Tuesday it was scrapping a share buyback but keeping a 9.8 euros per share dividend, despite a profit warning.

France's biggest insurer AXA said it postponed its annual meeting until June 30 to allow time for discussions with European regulators, though draft resolutions to pay a dividend remained unchanged. Its shares retraced some earlier losses to trade down 3%.

Italian financial group Unipol Gruppo said on Thursday it was suspending its dividend payment in line with requests from national regulators, while its insurance unit UnipoSAI. Italy's insurance watchdog IVASS called on companies to be prudent.

The Dutch central bank said it supported EIOPA's call "to the utmost".

The Bank of England said on Friday that it, like the EU watchdog, expected insurers to pay close attention to the need to protect policyholders.

"We therefore expect firms to be prudent in deciding on dividend payments or variable remuneration in view of the elevated levels of uncertainty presented by coronavirus and its impact on the global economy," the BoE said.

Britain no longer has a seat at EIOPA but is required to follow EU rules until the end of December under its Brexit transition deal.

RSA said it was reviewing the EIOPA letter, and Direct Line, which pulled a planned 150-million-pound ($184 million) share buyback last month, said it was monitoring the issue.

But Legal & General said late on Friday it still planned to pay its 2019 dividend. Its shares closed more than 10% lower before its announcement.

Although Switzerland is not an EU member, its regulator FINMA has urged financial institutions to carefully consider dividends.

Swiss Life and reinsurer Swiss Re, however, are all sticking to their dividend proposals, while Zurich Insurance shareholders approved the firm's dividend at its annual general meeting earlier this week.

EIOPA said the suspensions should be reviewed as the financial and economic impact of the COVID-19 epidemic started to become clearer.

($1 = 0.9251 euros)

($1 = 0.8154 pounds)

(Reporting by Alexander Huebner in Frankfurt, Toby Sterling in Amsterdam, Oliver Hirt in Zurich, Maya Nikolaeva in Paris, Valentina Za in Milan, Huw Jones and Carolyn Cohn in London and Muvija M. in Bengaluru; Writing by Rachel Armstrong, editing by Susan Fenton and John Stonestreet)

By Alexander Hübner and Huw Jones