* Fairfax shares drop as much as 9.6 pct
* Removal from index was unexpected
TORONTO, Nov 15 (Reuters) - Fairfax Financial Holdings Ltd shares dropped as much as 9.6 percent to a three-year low on Thursday after the stock was unexpectedly deleted from the MSCI Canada index.
Just before midday, the company's shares were down C$11.20, or 3 percent, at C$359.37 on the Toronto Stock Exchange after earlier falling as low as C$335.00, their lowest level since August 2009. Trading volume of 153,000 shares was about nine times the normal level.
MSCI, a global index provider, dropped Fairfax late on Wednesday from its Canadian index, which includes about 100 large and mid-cap Canadian-traded companies. Removal from the index means the shares will not be included in funds that mirror the index.
CIBC analyst Paul Holden said this could mean the removal of investment covering about 250,000 shares out of a total of about 20 million shares outstanding.
He said the removal from the index had not been expected.
Fairfax, which is run by Canadian investment guru Prem Watsa, is one of Canada's largest property and casualty insurers. The stock remains on the Toronto Stock Exchange's benchmark S&P/TSX composite index.
$1=$1.00 Canadian Reporting By Cameron French; Editing by Peter Galloway