NEW YORK (Reuters) - Hurricane Isabel may cost US insurers a fraction of what some experts had expected because the storm slowed in intensity and hit land at an area of North Carolina that has a relatively sparse population, industry groups said on Friday.

While earlier in the week estimates pointed to a possible $4 billion bill for insurers, now estimates are lower than $1 billion.

By comparison, 1999s Hurricane Floyd caused $2.1 billion worth of insured damage, 1989's Hugo $6 billion and 1992's Andrew nearly $20 billion, all adjusted to 2002 dollars, according to the Insurance Information Institute. Andrew was the most costly storm ever.

"It's going to be nothing near what people were projecting it to be," said Loretta Worters, a spokeswoman with the Insurance Information Institute, which on Friday said that it expected Isabel losses to be close to $1 billion.

The loss may only be $500 million, according to another estimate by Risk Management Solutions.

"For any of the large companies it's going to be a non- event," said Deutsche Bank analyst Alain Karaoglan.

But a senior executive with American International Group Inc., the world's largest insurer by market value, warned the cost of the hurricane could weaken the balance sheets of insurers whose balance sheets are already fragile.

"It is too early to tell how big Isabel will be, but it is certainly going to put a capital strain on many companies," Martin Sullivan, AIG's vice-chairman and co-chief operating officer told a meeting of insurers in London.

The two most exposed home and auto insurers to the areas hit by Isabel, Allstate Corp. and State Farm, have both said they are well-prepared to deal with damage claims.

Allstate spokesman Michael Trevino said the company will have a better idea of the amount of claims it will receive over the weekend, because many people in the affected areas haven't returned home yet and many phone lines are still down.

"The early reports suggest there was flood damage, but not a lot of structural damage to homes," Trevino said.

Flood damage to homes is covered through the National Flood Insurance Program.

Two major European insurers that provide backup insurance to U.S. companies said they would be lightly affected by the storm.

A Munich Re spokeswoman said the company's first estimate put its bill at less than $100 million, while a Hannover Re spokeswoman said it did not expect its claims from the hurricane to exceed $20 million.

Shares of Allstate were up 55 cents, or 1.5 percent, in late trading on the New York Stock Exchange, at $37.50.