Even with the arrival of January renewals there seems to be no end in sight to the soft market conditions that reinsurers have endured since 2012.

In a blunt assessment, Willis Re has concluded that hopeful forecasts for a “softening in the softening” at this month’s renewals has proven illusory in all but a few cases.

“The January renewals have unfortunately confounded the hopes of commentators that the market was reaching a pricing floor,” said John Cavanagh, global CEO of Willis Re.

In the latter half of last year there were mixed forecasts about the likely direction of pricing heading into 2016.

At the industry’s Rendezvous gathering, in Monte Carlo, in September, the talk was of rate reductions of between 5 and 7.5 per cent. However, a month later, at the Baden-Baden Reinsurance Meeting in Germany, it was suggested double-digit pricing reductions could be the reality. That was warning expressed by Nick Frankland, of Guy Carpenter & Company.

Two weeks later, and underlining the divergence of views, Hannover Re put forward a more hopeful outlook when it said pricing might be stabilising.

This week Willis Re released its 1st View report on renewals, along with commentary on key trends in reinsurance.

In a statement, it said: “Despite the signs of pricing stabilisation in peak property catastrophe zones at the June/July 2015 renewals, the forecasts for a ‘softening in the softening’ in reinsurance pricing have proved illusory.”

According to the report, rates have continued to decline across the majority of markets, with few examples of any slowdown in pricing deterioration.

“Reinsurers have faced difficult renewal dynamics in the global speciality markets, especially within the aviation and energy sectors, as large losses and reductions in original rates have yet to dissuade the inflow of additional capacity,” according to Willis Re, which is a division of Willis Group Holdings.

“Casualty markets have also not offered reinsurers any relief from further rate reductions, despite an increase in adverse results across a number of non-motor classes.”

While a pricing floor remains elusive, Mr Cavanagh commented: “However, as reinsurers look to close their 2015 accounts, most will likely report reasonable headline results. But looks flatter to deceive.

“As the Willis Reinsurance Index for the first half of 2015 demonstrated, underlying RoEs [return on equity] of reinsurers are at an extremely low 5.1 per cent after adjusting for reserve releases and abnormally low catastrophe losses.

“The 2015 full year analysis is likely to show further reductions as under-reserving issues start to appear at both a primary company and reinsurer level.”

He noted that while some insurers are making the most of reduced pricing to buy more reinsurance, a few larger companies continue to increase their retentions.

“While improved risk management is largely driving this trend, it is possible that some potentially misplaced optimism around underwriting results also exists as original rates reduce,” he warned.

Property catastrophe pricing is trending downwards in all seven countries and regions represented by charts in the 1st View report.

Regarding speciality lines, the report states that the direct aviation insurance market “continues to soften at an alarming rate” with risk-adjusted reductions in excess of 20 per cent commonplace, while in non-marine retrocession “some clients are reducing their exposure to ILS funds, preferring traditional markets”.

And in the life catastrophe sphere, the report notes: “On catastrophe covers, evidence that longstanding market leaders have reached ‘walk away’ pricing, but aggressive competition remains with new capacity entering the market.”

Mr Cavanagh said that, not withstanding the deterioration of the pricing environment, mergers and acquisitions continue.

“Asian-sourced capital is helping to drive valuations, as are buyers looking to buy scale and market relevance as deals drive yet more deals,” he said.

“The current high valuations are increasing the inherent risk in M&A transactions. This should give potential acquirers without very clear strategic targets and strong nerves even more reason to proceed carefully, but many remain confident.”

On a brighter note, he said there were two positive developments, one being Lloyd’s plan to launch a trading index “to help stimulate the development of a secondary trading market” and attract interest of the capital markets.

The second development is the announced creation of an industry-led task force to develop company disclosures for investors to assess physical, liability and transitional risks from climate change and related policies. This initiative was announced by Mark Carney, the governor of the Bank of England. The task force is to be led by Michael Bloomberg, the former New York City mayor.