Prices for some reinsurance policies have plummeted to their lowest for nearly 25 years, according to a global brokers.

Areas like UK property catastrophe reinsurance are priced around the same as they were in the 1990s.

And a third straight year of falling prices for back up insurance against natural disasters like earthquakes and hurricanes has raised concerns about the future shape of the reinsurance industry.

Now bankers are predicting a flurry of takeover bids — particularly for Bermuda-based catastrophe reinsurance specialists and syndicates at Lloyd’s of London.

Competition has already forced reinsurers to reduce premiums — even in areas that have been hit by a succession of big claims like the aviation market.

Insurers face the biggest annual bill for aircraft disasters since 2001 following a series of incidents, including the crash of an AirAsia jet this week.

Rates for political risk cover have also come under pressure in spite of the threat of losses from rising instability in Russia — one of the largest markets for the sector.

According to global brokers Willis Re, who have an office in Bermuda, renewal rates for natural catastrophe cover — traditionally a main source of profit for reinsurance firms — have dropped about ten per cent for policies due to take effect from January 1.

Willis Re International chairman James Vickers said, however, the scale of price reductions was not as large as 2013 — partly because insurers were becoming wary of cut-price deals.

Mr Vickers added: “If you’re going to be asking a reinsurer to pay a claim in ten years, you want to make sure it’s still around. They wish to maintain sustainable relationships.”

Premiums have also been depressed by a relative lack of expensive natural disasters and fresh competition from non-traditional sources of funding like insurance linked securities (ILS).

Investors are flocking to buy ILS products like catastrophe bonds.

The lack of catastrophe in recent months has supported profits and share prices — but regulators and ratings agencies like Moody’s are becoming concerned about how well-prepared the industry is for a major catastrophe.

Moody’s predicted last month that reinsurance company returns were likely to be squeezed this year to “near or below the industry’s cost of capital.”

But the ratings agency said that larger groups like Munich Re and Gen Re, part of Warren Buffet’s Berkshire Hathaway group, were in a better position than less diversified competitors.

XL, which maintains a large presence in Bermuda, has launched a takeover bid for Catlin — which, if successful, would be the largest-ever buyout of a Lloyd’s insurer.

Willis Re said that for many reinsurers “their only sustainable course of action is to change their business models, portfolio mixes and to strive for scale so they cannot be ignored by buyers.

The firm added that some reinsurers were reluctant to write business at the lower prices.

The firm’s report on the state of the industry said: “This is particularly true of natural catastrophe, where some reinsurers have declined offered terms on some placements with thin margins as a step too far.”

It added: “Many reinsurers underwriters are also going into 2015 with reduced budgets, which helps them resist overly aggressive pricing and terms and conditions.”