UPDATE 1-Swiss Re says prioritises margins over volume

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ZURICH, Sept 8 (Reuters) - Swiss Re (RUKN.VX), the world's largest reinsurer, is not exepecting a complete turnaround in reinsurance rates in the near future, and preserving its margin is its priority, even if that means less business.

"The company expects reinsurance rates to continue their down trend in most locations and lines of business, albeit at a less pronounced pace than last year," it said in a statement issued as reinsurers meet in Monte Carlo for an annual meeting.

Despite the fact it does not expect a recovery any time soon, Swiss Re said it still saw opportunities, for example in aviation and engineering.

Michel Lies, Swiss Re head of client markets, said the insurance market should take note that the price for risk is rising and capital costs have soared due to the credit crunch.

Swiss Re also said the insurance industry should be worried about rising inflation, which could generate more losses and reduce firms' capital base. (Editing by Will Waterman)