REFILE-Reinsurers under pressure at Monte Carlo meeting

(Corrects spelling of "unprecedentedly" in 15th paragraph)

By Simon Challis, European Insurance and Funds Correspondent

LONDON, Sept 5 (Reuters) - Darker economic clouds are gathering over the world's reinsurers as they travel to the Mediterranean coast this weekend to kick-off crucial pricing discussions with their insurance clients in Monte Carlo.

Reinsurers should fly down to the south of France in buoyant mood. Their balance sheets are at their strongest levels in years, while they have enjoyed bumper profits thanks to a combination of no major catastrophes since 2005 and strong investment returns.

They have also escaped unscathed from Hurricane Gustav, which swirled away from highly-insured coastal cities such as New Orleans and oil rigs in the Gulf of Mexico. Insured claims from the storm are estimated to be between $4.3 billion and $10 billion -- a fraction of 2005's Hurricane Katrina, which cost insurers $41 billion.

Prices for the risks they assume from insurers are falling, but from the highest levels many in the industry have ever witnessed, after hurricanes Katrina, Rita and Wilma wreaked devastation in 2005 and caused reinsurance prices to shoot up.

But reinsurers will arrive in Monte Carlo in uncertain mood. Turbulence on the investment markets has wreaked havoc on their earnings, with market-leader Munich Re (MUVGn.DE) having already dumped its full-year earnings target due to the volatility.

While reinsurers have survived the credit crunch much better than banks, the crisis has hurt the sector.

Investment losses have shaved their capital but also severely reduced their ability to raise fresh cash quickly following costly disasters, putting their plans to return further excess capital to shareholders in jeopardy.

Meanwhile, their growth prospects look uncertain as reinsurers find themselves facing a dilemma.

PRICING PRESSURES

Their insurance clients are clamouring for price cuts, citing the absence of costly disasters to justify continued high prices.

Reinsurers have, on the whole, resisted this pressure so far; prices have fallen, but not by too much.

Irritated at their reinsurers' unwillingness to soften their stance, particularly for catastrophe risk cover, some insurers are simply deciding not to use reinsurers.

This will severely test reinsurers' resolve, particularly as the slowing global economy means their revenues are likely to stall over the next couple of years.