Bermuda reinsurance executives gathering for their annual get-together in Monte Carlo this weekend will be considering their response to increasingly popular alternative insurance-linked investments that are driving down prices in the industry.Investment funds looking for higher yields in a low-interest rate environment have funnelled billions of dollars in recent years into so-called “catastrophe bonds”, which are sold by insurers to share the risk they take on for natural disasters.“Reinsurers, whose business is to help shoulder the risks faced by insurers in exchange for part of the profit, have seen their pricing power diminish and their relevance threatened,” Reuters reported yesterday.“The competition is blamed for pushing reinsurance prices down by more than a fifth in the lucrative market for hurricane coverage in the United States when contracts there were renewed in June and July.“That downward pressure may spill over into other lines of business when reinsurers and their insurance company clients renew a further round of contracts on January 1, brokers said.James Vickers, chairman of broker Willis Re International, said price pressures will lead some reinsurers to shift their attention to speciality areas like marine or aerospace insurance, while others may opt to return excess cash to shareholders if prices are too low.The world’s biggest reinsurer, Munich Re, has already said it is considering buying back its own shares.The No. 2 player Swiss Re has said its “first priority” is growing its dividend.Credit rating agency Standard & Poor’s calculates that the reinsurance sector held $34 billion in excess capital last year.As long as interest rates stay low, investors in alternative insurance products like catastrophe bonds look set to keep gnawing away at the profitability of traditional reinsurers.Around $10 billion of new capital flowed into insurance-related investment structures over the last 18 months, with the total market now worth around $45 billion, Guy Carpenter estimates.Despite the challenges, credit rating agency Moody’s gave an upbeat assessment of reinsurers at a briefing in London, arguing that most firms have embraced the new environment.