Bermuda’s non-life insurers are facing challenging market conditions - and there is no sign of an improvement in the near future.That is the view of insurance industry analysts from credit rating agency AM Best, who discussed the Bermuda market in an online seminar this week and suggested that the soft market cycle has yet to reach its trough.A combination of softening prices and low investment yields are squeezing the Island’s re/insurers and the release of loss reserves from prior years - which contributed signifcantly to last year’s profits - are drying up.Greg Reisner, senior financial analyst at AM Best, said: “When you put those factors together, you really don’t have a robust set of business conditions,” he said. “And there’s no signal that trend will change in the intermediate term.”However, the Island’s companies are very well prepared to meet claims resulting from a major catastrophe and Bermuda remains an efficient place to operate, the analysts concluded.The discussion centred on Best’s Special Report, released last month, entitled “Favourable Results Conceal Looming Concerns for Bermuda’s (Re)Insurers”.AM Best vice-president Robert DeRose ranked Bermuda as one of four major markets including London, Switzerland and Ireland.Part of Bermuda’s appeal as a market leader is its close proximity to the United States, said Mr DeRose. “It’s also a very efficient place to operate. From a regulatory perspective it is relatively easy to set up a company and get it up and running, and Bermuda has a very favourable tax structure. That’s provided an efficient way to deploy capital to the US and the global insurance and reinsurance markets.”Today, the country boasts about $90 billion in capital, he noted.However, a significant amount of capital can be a double-edged sword, said Reisner. “Finance capital on one hand is a good thing because it helps weather some adverse conditions, which is part of our stable outlook. But all this capital needs to be put to work to get a return for their investments, and there’s not a lot of opportunity for sufficient yield to be made or return for investors.”That has led to a lot of share repurchases through the first three quarters of 2010, he said. “And we anticipate a fair amount of repurchases in 2011, barring any major event that might remove capital in that fashion.”The analysts said overall premiums have remained relatively flat in recent years, while shareholders’ equity has risen. Also, insurers have experienced relatively few extreme catastrophic losses in recent years, a situation that is contributing to further weakening of insurance rates and competition in the reinsurance markets.Is the Bermuda market well prepared for catastrophes? “Without a doubt,” said Mr DeRose. “Not only is capital robust but operationally Bermuda has responded to catastrophes extremely well and has always met all of its obligations.”Another looming concern for Bermuda companies centres around reserves. “For the past several years, we’ve seen loss-reserve releases in the Bermuda market. In 2009, it was just below seven percent, and we’re seeing it trend around seven percent for the first three quarters of 2010,” Mr Reisner said. “This year we have a forecast where we’ve cut that in half because we don’t see loss-reserve releases being as big as they have been.”Looking ahead, he said factors for Bermuda, such as pricing trends and low investment yields, “aren’t much different than what we see for other global players. But there are challenges including some sizable ones. At the same time, however, they have navigated them well thus far. I think it’s just a wait-and-see approach to see how different companies separate themselves from the pack.”