* FTSEurofirst 300 index rises 0.9 percent
* Insurers rise; EU watchdog says no Japan crisis no threat
* Carmakers gain, Renault top pick for UBS
* For up-to-the minute market news, click on
By Joanne Frearson
LONDON, March 17 (Reuters) - European shares gained ground on Thursday as investors snapped up beaten down shares following a sharp sell-off on the Japanese nuclear crisis.
By 1206 GMT, the pan-European FTSEurofirst 300 index of top shares was up 0.9 percent at 1,077.14 points as technical indicators pointed to a rebound, with the relative strength index (RSI below 30 - a signal that equities are "oversold".
Volume for the index was 50.6 percent of its 90-day average.
"There is going to be some disruption on industries by the situation in Japan, but what happens is the market often over- discounts these issues and big chunks are taken off prices," Paras Anand, head of European Equities at F&C Asset Management, which has 5.5 billion euros ($7.67 billion) of assets under management in European equities, said.
"We look at things on a longer-term basis and are asking how these prices are set on a three to five year view. We favour insurers like Allianz, it has some limited exposure, but it has a decent long-term franchise and pays a good dividend yield. It has been hit a bit hard unnecessarily."
Insurers, which have been one of the sectors hardest hit by the events were among the best performers on Thursday, with the STOXX Europe 600 Insurance index rising 1.7 percent.
German insurance group Allianz, which UBS also said was "unjustifiably over-sold", was up 1.6 percent while the major reinsurers such as Munich Re and Hannover Re rose 3.7 percent and 1 percent respectively.
Also giving some support to the sector was news that the European Union's insurance watchdog has said euro zone insurers face no solvency threat following Japan's earthquake and tsunami.
CARMAKERS GAIN
Carmakers which have been heavily sold on concerns that sales would be dented by the Japanese crisis, featured among the top movers, with the STOXX Europe 600 Automobiles & Parts up 1.7 percent.
BMW gained 2.7 percent. Barclays Capital said the sell-off offers a comfortable entry point and any potential loss of Japanese sales is likely to be offset by increased demand in the U.S./Europe.
Renault, which is a top pick on UBS's list of sold-off shares, rose 2.3 percent.
However, other traders said there were still reasons to be cautious.
"The drop has been violent, but the newsflow remains very alarming. There is short covering at this point, and we continue to see outflows," said David Thebault, head of quantitative sales trading, at Global Equities, in Paris.
"Stocks might look oversold on the short term, but they are not if we're heading into a bear market. The Japanese crisis could have severe consequences for the global economy. Just think about divestment from Asian central banks and investors, that's the real fear here."
In Japan, water was being dumped on the overheating Fukushima Daiichi nuclear plant by Japanese military helicopters and a water cannon was used to spray the complex's No.3 reactor.
Kyodo news agency reported that Japan's upper house chief suggested it might be an option to close the Tokyo stock market and foreign exchange market for about a week. Across Europe, the FTSE 100 index was 0.9 percent higher, Germany's DAX gained 1.3 percent and France's CAC 40 was up 1 percent.
(Additional reporting by Blaise Robinson; Editing by Erica Billingham)