The industry’s hopes for the soft reinsurance market coming to an end during the June and July renewals were premature, analysts at investment banking firm Keefe, Bruyette & Woods (KBW) said in a report.

KBW maintains its caution on the Bermuda market, as it foresees a decline in property-catastrophe “subsidy” despite a low level of losses from the 2017 hurricane season.

“We think normalised losses would impede book value growth and share repurchases without meaningfully boosting rates,” it added.

KBW contradicted several reinsurance executives’ cautiously optimistic view on reinsurance pricing finding a floor.

“We doubt the modest recent interest rate uptick justifies rate decreases — the soft market probably hasn’t yet fully played itself out,” KBW said.

It cited a report by Willis Re on midyear renewals, which revealed reinsurance rates were still falling in numerous business lines and geographical markets.

Reinsurance profits have been under pressure in the past few years, as alternative capital such as insurance-linked securities flooded into the market. This, coupled with muted catastrophe loss activity, kept the downward pressure on reinsurance rates.

Reinsurers are also feeling the crunch on their investment returns, due to persistently low interest rates.


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