A traditional soft market is in the cards as alternative capital-driven pricing pressure in the reinsurance market flows to the primary market, a recent Nomura report contends.
Nomura analysts Cliff Gallant and Mathew Rohrmann say in the report—titled "The Evolution of Reinsurance: Soft Market to Spur M&A"—that one impact of the growing alternative-capital presence will be further price weakening in property/catastrophe reinsurance rates, followed by weakening across all reinsurance lines before finally affecting primary-commercial rates.
"We have already seen a slowdown in primary-commercial rate increases despite the ongoing pressure of a low-investment-yield environment," the report states. Further, Nomura expects that the availability of cheap reinsurance will exacerbate the fight for market share at the primary level, leading to a traditional soft market.
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