Fear of natural disasters and financial market volatility look set to weigh on reinsurance takeovers, counterbalancing regulatory changes and pricing developments that favour consolidation, reinsurance broker Guy Carpenter said.

The unknown factor hanging over the industry is whether the large amount of catastrophe activity seen in 2011 will continue into 2012, Guy Carpenter, part of Marsh & McLennan , said in a report published on Wednesday.

Given this uncertainty, combined with market volatility seen in the second half of 2011, Guy Carpenter expects the pace of deals in early 2012 to remain muted.

Japan's Tohoku earthquake pushed total catastrophe claims last year to $108 billion, making it the second costliest catastrophe year after 2005, according to reinsurer Swiss Re .

Worries over costly natural disasters could deter potential acquirers attracted by insurers' historically cheap valuation after several years of flat or falling insurance prices.

Smaller European insurers face added pressure to consolidate to comply with the European Union's tough Solvency II capital regime, due to come into force in 2014.

U.S. and Bermudian insurers spent $12.8 billion on mergers and acquisitions last year, up 75 percent, Guy Carpenter said, with U.S. insurer Alleghany's $3.4 billion acquisition of Transatlantic Holdings among the biggest deals.

Guy Carpenter said insurance M&A could get a fillip from private equity investors looking to dispose of insurance assets bought before the 2008 financial crisis.

Takeover activity could also be boosted by in the event of a convincing rise in insurance prices, it said.

(Reporting by Myles Neligan)