NEW YORK (Bloomberg) — The global reinsurance industry had its rating outlook lowered to "negative" from "stable" at Moody's Investors Service because the state of capital markets may make it difficult for companies to replenish funds.

"Restrained demand, overcapacity and fragile market confidence point to a higher chance that credit support will weaken rather than improve over the next 12 to 18 months," Moody's said in an e-mailed statement yesterday. There is an "uncertain reception from the capital markets, particularly when signs point to greater price competition in 2010".

Reinsurers, which help primary insurers shoulder risk, are meeting with clients from this weekend for their annual gathering in Monte Carlo to begin talks about terms and conditions for next year's contracts. It may be harder for them to push through a second year of rate increases because the stock-market rebound and an absence of costly natural catastrophes is restraining demand for their coverage.

The Atlantic hurricane season from June through November, which can result in reinsurers' most costly claims, hasn't produced a major storm on the US coast this year. In 2008, Hurricane Ike slammed into Texas in September, costing the insurance industry $20 billion and helping push up reinsurance rates by about eight percent this year following a two-year decline.

A survey of life and non-life insurers in the US and Europe showed the vast majority don't "plan to buy more reinsurance next year and a fraction expect to buy less", Moody's said.