FRANKFURT/ZURICH (Reuters) - The world's two biggest reinsurance companies, Munich Re (>> Muenchener Rueckversicherungs-Ges. AG) and Swiss Re (>> Swiss Re AG), prepared to reward shareholders by handing back cash in a year that saw both avoid massive claims for disasters like hurricanes or earthquakes.

Industry leader Munich Re on Thursday unveiled plans to buy back up to 1 billion euros ($1.35 billion) of its own shares in the coming months, hoping to cheer investors after a fall in third-quarter earnings.

Swiss Re, which saw quarterly net profit halve to $1.1 billion, said it was open to paying a special dividend, depending on its full-year results.

Despite the profit declines, both companies' results turned out better than analysts had expected and both said they were on track to reach their earnings guidance.

While reinsurers have been hit by some big localised claims this year, such as hail storms and flooding in Germany, they have not faced massive payouts for hurricanes or earthquakes, leading many analysts to predict the industry would move to lure investors with improved dividends or share buy-backs.

Reinsurers, whose business is providing a financial backstop to insurance companies facing big claims, are also finding it tough to get a good price for the risk cover they offer to their clients, leaving them with extra cash they cannot plough into the business.

This is partly due to the increasing threat posed by 'alternative' investors like pension and hedge funds, who have been providing reinsurance in lucrative markets like U.S. hurricane risk, driving down the pricing power of traditional reinsurers like Munich and Swiss.

Munich Re Chief Executive Nikolaus von Bomhard had raised the prospect of a share buy-back earlier this year, and the 1 billion euro figure is consistent with Munich Re's track record.

It bought back on average 1 billion euros worth of its own shares annually between 2006 and 2011.

"The announced share buy-back programme with a volume of 1 billion euros exactly matches our expectations but is positive," said DZ Bank analyst Thorsten Wenzel in a note.

Munich Re's share fell 2.6 percent by 0826 GMT, while Swiss Re got a more positive reaction, with its share rising 2.6 percent.

The STOXX Europe 600 insurance index <.SXIP> fell 0.5 percent.

(Reporting by Jonathan Gould; Editing by Noah Barkin and Tom Pfeiffer)

By Jonathan Gould and Alice Baghdjian