A “complex web of factors” is responsible for the continuing pressure on reinsurance renewal pricing, according to Robert Hartwig.

The president of the Insurance Information Institute, in New York, noted that there have been a number of consecutive years with soft market conditions, and reasons for the depressed pricing include a lack of major natural catastrophes, and low interest rates bringing substantial investment capital into the sector as fund managers seek out better returns.

However, Dr Hartwig noted reinsurers have continued to produce strong earnings results, and he sees a number of market opportunities where companies can grow their business, such as the cyber risk space.

Regarding the factors contributing to the soft market, he said: “There has been the torrent of alternative capital into the market from pensions and hedge funds, much of it going into cat bonds. That has had an effect on pricing.”

The low interest rate environment was another reason investment managers have placed capital into the reinsurance space, notably through insurance-linked securities (ILS), exasperating the effect of surplus capital in the sector.

Dr Hartwig said the Federal Reserve’s decision to keep US interest rates on hold was something beyond the control of the reinsurance industry.

As for market dynamics, he believes cat bonds and other forms of ILS are likely here to stay, even if there is a market-changing insured loss event or rises in the Fed rate.

“The market has changed substantially and some of those changes are likely to be permanent. Alternative investments are likely to remain,” he said.

However, he added: “The large global reinsurers remain strong. They have had good results and are looking at a variety of ways to grow business, such as looking at parts of the world that have low reinsurance penetration.

“And there are new risks. The cyber risk market is currently $2 billion, and is expected to be worth $7.5 billion by 2020. Reinsurance will play a role there.”