UPDATE 1-Buffett won't bid for RBS insurance arm

(Combines stories, adds share price, background)

FRANKFURT, May 19 (Reuters) - U.S. investor Warren Buffett is not interested in bidding for Royal Bank of Scotland's (RBS) (RBS.L: Quote, Profile, Research) insurance arm and expects fallout from the credit crunch to keep roiling financial markets, he said on Monday.

"I have ruled out doing anything with the RBS group, which says nothing about the group; I just made that decision," he told a news conference in response to a question.

RBS shares in London were down 3.5 percent at 257.25 pence at 1417 GMT.

Buffett said he still liked the insurance business in the United States, even if some favourable trends in recent years, particularly in car insurance, had begun to reverse.

"There is no way we can do as well in profits in 2008 and 2009 as we did in 2006 and 2007, but it is still a decent business," he said.

Buffett said he thought the fallout from the global credit crisis was not over yet.

Speaking specifically of the U.S., he said he did not think the effects of the credit crunch were nearly over.

"I think there will be rippling secondary, tertiary effects ... It is really more an effect of the residential real estate bubble, which led to the credit crunch in some degree."