Near-record catastrophe claims, the euro zone debt crisis and low interest rates are likely to result in mostly weaker 2011 profits for European insurers.

Insurers, major investors in government bonds, took hefty writedowns on their portfolios during 2011 to reflect sharp falls in the price of some eurozone sovereign debt amid mounting worries over the issuing countries' ability to repay.

The year was also marked by the industry's second-biggest natural catastrophe loss, with European insurers and reinsurers absorbing a big chunk of the estimated $100 billion in claims stemming from Japan's Tohoku earthquake and other disasters.

The double-hit from writedowns and catastrophes came as the sector endured its third consecutive year of rock-bottom interest rates, which erode investment returns and can inflict losses on life insurers that guaranteed customer payouts when yields were higher.

The full-year figures are going to reflect a more challenging environment, said RBC Capital Markets analyst Jean-Francois Tremblay.

You are going to have the effect of very meaningful catastrophe losses, and you're going to have more pressure as a result of continued reinvestment into lower-yielding assets.

Investors will be looking for evidence that European insurers can avoid cutting their payouts to shareholders amid worries the euro area crisis might have sapped their capital reserves.

There's still a lot of uncertainty around companies' capital positions because of the high level of volatility in equity markets and bond spreads, RBC's Tremblay said.

Italy's insurers including Generali could cut dividends to make up for losses on their big holdings of Italian sovereign debt, which has suffered bigger price falls than any eurozone government bond except Greece's, analysts at stockbroker Cheuvreux wrote in a note in December.

Insurers must write down their Greek bonds because an international bailout package being negotiated for Greece counts as a default event under accounting rules, but they are as yet under no obligation to impair their Italian debt.

The sector's challenging 2011 was reflected in its shares, with the Stoxx 600 European insurance index <.SXIP> losing 14 percent of its value over the course of the year, underperforming a 10 percent fall for the wider market <.FTEU3>.

The index has climbed 13 percent since the start of 2012 as fears of a major European sovereign default have eased, but the sector remains vulnerable to any perceived deterioration in eurozone members' creditworthiness.

Investors will also be hoping for confirmation that a slow rise in motor and home insurance prices across most major European markets is gathering pace.

Prices began to edge higher across much of Europe last year after an extended period of stagnation prompted some insurers to write less business, easing competitive pressures, analysts say.

The increase partly reflects price hikes by companies worried they may fall short of higher reserving requirements under the European Union's new Solvency II capital rules for insurers, due to come into force in 2014.

The underlying message is a positive one - German motor is improving, and most countries are ticking up, said Berenberg Bank analyst Peter Eliot.

(Reporting by Myles Neligan. Editing by Jane Merriman)