This just started about a week ago, before this incident she was fine with bugs, she would ust wave her hand and they would fly away.
She has stuffed bugs and has seen the movie "A Bugs Life" many times.
Like paxiled said, most childhood phobias will resolve themselves - especially if you respond to her reaction in an uneventful way (there's no use trying to reason with a 4 year old). How long has your daughter been reacting this way? If the problem persists, you can consider bringing her to a child psychologist who is familiar with behavioral-modification. You can also try to desensitize her a bit by getting her a insect stuffed animal (make sure it is cute and fuzzy), or watching Pixar's "A Bug's Life."
I was terrified of bees and wasps as a kid, but it went away. Hard to equate childhood fears with adult ones.
That is a specific phobia. Take her to see a child psychologist and they can help her learn to overcome it depending on what the cause of it is.