(Bloomberg) -- The world’s largest reinsurers are anticipatingeven bigger price declines when policies are renewed in 2016 thanenvisaged a month ago as a flurry of takeovers in the industryfails to absorb some of the excess capital.

Reinsurers and brokers including Guy Carpenter, owned by Marsh& McLennan Cos., flew into the German town of Baden-Baden thisweekend to continue negotiating terms and conditions for contractsdue for renewal in January. It follows discussions that were heldin Monte Carlo in September, which suggested the price slump may beslowing.

“In Monte Carlo, we were certainly suggesting that ratereductions will be in the region of between 5 to 7.5 percent tomaybe 10 percent,” said Nick Frankland, chief executive officer ofGuy Carpenter’s operations in Europe and the Middle East. “They maybe more than that. The market is struggling to understand how toquote in this environment.”

Rates fell this year because of the record $425 billion ofsurplus capital that was available to underwrite risk, coupled withone of the quietest years for catastrophe losses in the pastdecade. The pressure on pricing, combined with record-low interestrates, has spurred a string of deals in both the Lloyd’s andBermuda insurance markets, culminating in Amlin Plc’s record $5.3billion takeover by a Japanese competitor.

Abundant capacity

Mergers and acquisitions “haven’t impacted capacity,” Franklandsaid in a telephone interview before flying to Baden-Baden.“Capacity is still abundant and that is naturally having acontinued effect on the pricing environment.”

Frankland expects the current wave of insurance deals tocontinue, driven by Chinese and Japanese companies seeking toexpand outside Asia or by insurers in Europe and the U.S. marketslooking to build scale or expand into new territories.

“There are a lot of companies in insurance and the reinsurancespace that could easily complement each other, a long list ofthem,” he said. “These deals have proved that any deal of any sizein a market that is so awash with capital and funding is possible.You could see a bigger one yet.”

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