LONDON (Bloomberg) - Billionaires Warren Buffett and Christopher Flowers are buying stakes in European insurers, prompting some less-influential investors to anticipate a rebound for the industry's shares after a 23 percent slump since June.

Mr. Buffett's Berkshire Hathaway Inc. acquired three percent of Swiss Reinsurance Co., the world's biggest reinsurer, while Mr. Flowers's buyout firm bought 2.7 percent of Dorking, England-based Friends Provident plc. and said it might bid for the rest.

The purchases are a vote of confidence for an industry that is been battered by concerns about possible sub-prime-related losses, slowing economic growth and declining stock markets, said Youssef Ziai, a London-based analyst at ABN Amro Holding NV. European insurers are trading at 8.7 times estimated earnings, near the cheapest in four years, data compiled by Bloomberg show.

"People notice what Buffett does," said Adrian Darley, who helps oversee about $130 billion at Resolution Asset Management in London, and owns shares of Zurich-based Swiss Re. "Buffett traditionally has taken a five, 10 or 20-year view. The people driving the market at the moment are taking a one-day view."

Mr. Buffett's Swiss Re purchase drove the company 3.7 percent higher in Zurich trading on January 23, the day the deal was announced. Swiss Re fell the most since 2003 on November 19 when the world's largest reinsurer reported a $1.1 billion writedown on contracts sold to protect a client against losses on mortgage-backed securities.

Mr. Flowers's approach to Friends Provident, the life insurer founded by Quakers more than 175 years ago, pushed the stock up 7.5 percent in the two days following the January 21 announcement.

Insurers' shares also got a boost in Europe on Thursday following a move by New York State regulators to push US financial institutions to rescue bond insurers and prevent more writedowns on credit-market securities.

Imitating the 77-year-old Mr. Buffett, who built Omaha, Nebraska-based Berkshire over four decades into a $210 billion company, has been a profitable strategy in the past. Buying what he bought, even months after his purchases, delivered twice the return of the Standard & Poor's 500 Index during the last three decades, according to a study last year by the American University, Washington and University of Nevada, Las Vegas.

Berkshire spokeswoman Jackie Wilson declined to comment on the Swiss Re deal.

Mr. Flowers, 50, a former Goldman Sachs Group Inc. banker, joined with Ripplewood Holdings LLC founder Tim Collins in 2000 to buy near-bankrupt Long-Term Credit Bank of Japan, the first to be acquired by foreign investors. They re-named the Tokyo-based bank Shinsei before taking it public in February 2004, making a more than $7 billion profit for investors.

Not all investors are ready to follow their lead after stock indexes in Britain, France and Germany entered a bear market this week, meaning they have fallen more than 20 percent from their highs. During the last bear market, which ended in 2003, European insurers were forced to raise more than $20 billion of capital after investment writedowns led to losses at companies including Swiss Re and Munich Re, the second-largest reinsurer.

"I think this time it will be generally tougher," said Julian Chillingworth, who helps oversee about $21 billion at London-based Rathbone Brothers plc. He expects insurers to struggle as economies sputter and falling real estate prices in the UK undermine consumer spending.

Insurers including Zurich-based Swiss Re have scaled back their stock holdings since the last market plunge, making them less vulnerable to slumping equities this time around, said Chris Waterman, an analyst at Fitch Ratings in London.

Swiss Re held eight percent of investments in stocks in 2006, down from 34 percent in 1999, according to its annual reports.

"Buffett's investment in Swiss Re is a positive message for the sector," said Guy de Blonay, who helps manage about $41 billion at New Star Asset Management Group Ltd. "Today, they are much better capitalised. They have the potential to buy back shares and increase dividends as the financial services sector enters a more difficult period."

Berkshire has been increasing its insurance-related holdings during the past month. The company received a license last month to start a bond insurance company in New York and agreed to buy a reinsurance unit from ING Groep NV, the biggest Dutch financial-services company, for about $440 million.

Swiss Re leapfrogged Munich Re in 2006 as the largest reinsurer with its $7.4 billion purchase of General Electric Co.'s Insurance Solutions, which boosted premiums to 29.5 billion Swiss francs ($27 billion). Berkshire Hathaway is the third-largest reinsurer.

Mr. Buffett wrote in Berkshire's latest annual report that his investment criteria include companies with "good returns on equity," little or no debt, "simple" businesses that he can understand, and consistent earnings. Berkshire has more than $40 billion of cash available to make purchases.

Swiss Re earns more than half of its premium income from helping shoulder property-and-casualty risks for insurers such as Munich-based Allianz SE. It has a target of earnings-per-share growth of 10 percent and a return on equity of 13 percent over the course of the reinsurance pricing "cycle."

A turnaround in European insurers may depend on whether the economic slowdown in the US deepens and spreads to Europe, said Mr. Ziai at ABN Amro. "If it's a shallow recession, they will probably pull out quite quickly," he said. "If it is deeper, there could be some negative impacts for a while."