Reinsurance pricing should see single-digit declines in 2016 while the outlook for the global reinsurance industry remains negative, according to a new report released Wednesday by Moody's Investors Service Inc.

Excess capital and weaker demand continue to vex the sector, producing price drops of some 10% in some lines during 2015, according to the new report, “Global Reinsurance Outlook-2016: Outlook Remains Negative Amid Excess Capacity, Shrinking Demand.”

“Moody's is expecting a single-digit decrease in prices for 2016,” said Stanislas Rouyer, associate managing director at Moody's in New York.

The ratings agency puts excess capacity at the top if its list of headwinds for the reinsurance industry.

“The outlook for the global reinsurance sector remains negative as reinsurers continue to face excess capacity in traditional reinsurance capital and the various forms of alternative capital, persistent low interest rates, and reduced demand from reinsurance buyers due to rationalization of reinsurance purchases and low global economic growth,” the report said.

Though “price decreases peaked during the January 2014 renewal season, and have gradually pulled back,” according to Moody's, the report shows pricing down some 5% to 10% in lines including U.S property, U.S. general liability, and U.S. transportation as of June/July 2015.

Citing figures from GC Securities, the report says that alternative capital as a percentage of global property catastrophe reinsurance capacity accounted for approximately 18% of year-end 2014 global property catastrophe reinsurance capacity, up from 8% in 2008.

The problems associated with increasing supply are exacerbated by falling demand, said Moody's, something the rating agency said it expects to continue.

“Primary insurers, meanwhile, have met excess capacity with diminishing demand for reinsurance,” said the report, adding “Over the next few years, we expect insurance industry consolidation to further lower demand for reinsurance, as merged entities have lower capital requirements through risk diversification.”

Such consolidation is having a structural effect on the reinsurance sector, placing smaller players in a more difficult position, Moody's said.

“Over the past few years the reinsurance industry has become increasingly tiered, as primary companies have consolidated more cessions with reinsurers that have the capacity and breadth of expertise to provide coverage across many lines and geographies, including whole-account coverage. As this trend progresses, we expect that lower- and mid-tier reinsurers will increasingly be relegated to capacity player status in large account business, and will face more competition from alternative capacity,” the report said.

As a response, reinsurers are looking to write new types of business, such as emerging markets and newer risks like cyber, the report said.

“In the face of the steady commoditization of some established lines, such as catastrophe-exposed property, reinsurers are looking to new products or emerging risks and markets, which in many cases offer greater barriers to entry and more defensible pricing power,” the report said.