It seems nobody dares say it too loudly, but there was whispered talk of better times ahead at the Reinsurance Rendezvous in Monte Carlo.

After several years of rate drops, extraordinary downward pressure on pricing is finally easing.

JLT Re says this year’s mid-season renewals offered relief for the first time since January 2013.

“Although pricing remained under pressure across most lines of business at June 1 and July 1, there were early signs of some stabilisation in certain segments, albeit at historically low levels,” Global CEO Mike Reynolds says.

“The flattening trajectory of reinsurance rates during these renewals indicates change is again under way as increasing demand for reinsurance, an easing in the rate of alternative capital entry and reinsurer consolidation are coalescing to create an eventual pricing trough.”

Hannover Re agrees pressure on price and conditions should ease in January.

Supply still exceeds demand but “we are seeing a reduction in the oversupply of reinsurance capacity compared with the previous year”, CEO Ulrich Wallin says.

“Most significantly, the resurgent economy of the US, the world’s largest reinsurance market, is sending out positive signals for the premium trend in developed markets.”

Hannover Re believes certain lines and markets even offer scope for rate rises.

Suncorp Commercial Insurance CEO Anthony Day, who attended the Reinsurance Rendezvous, told insuranceNEWS.com.au that while capacity is still growing, there is scope for pricing to fall further.

“There is a point where rates may hit the bottom, but it’s difficult to determine when,” he said. “The lower reinsurance rates have assisted insurers over recent years. However, it’s only one of many costs that must be managed.”

Swiss Re expects prices to stabilise “across many lines of business”, and says high levels of underinsurance offer great opportunity.

“The potential for economic losses from natural disasters and other risks are growing each year, while the share of insurance is not increasing,” Group CEO Michel Liès says.

“Our industry has the capability and unique knowledge to assess and quantify the risks across so many areas of our everyday lives.

“Let’s use this potential and expand the current reach of insurance by working together.”

Reinsurance broker Guy Carpenter says excess capacity and falling prices have contributed to the long-predicted wave of market consolidation this year.

It says the combined impact of reserve releases, a benign loss environment, escalating solvency capital requirements and more robust balance sheets have helped to cushion the impact of the softening cycle, and delay merger and acquisition (M&A) pressures.

“However, these delaying influences cannot be expected to endure,” it says.

“It is reasonable to anticipate that the declining rate and low investment yield environments will eventually be realised more fully in financial results.”

In the absence of a “major market catalyst”, continued proliferation of M&A activity is expected.

Mr Day agrees further consolidation is likely.

“We have definitely not seen the end of it, although the multiples being paid are high and this may restrain some reinsurers,” he told insuranceNEWS.com.au.

“That, coupled with the possibility of further M&A activity among insurers, will undoubtedly affect the global – including Australian – insurance market.

“Much of the consolidation is related to the search for growth and this could possibility affect the availability of reinsurance capacity.

“Obviously, as one of the insurers with the biggest reinsurance programs, Suncorp is constantly reviewing its capacity needs.

“But from conversations at the conference, there appears to be plenty of capacity available – so I’m not concerned there will be a negative impact for us.”

Ratings agency Fitch warns “headline-grabbing” M&A activity may do little to help businesses cope with the harsh reality of falling prices and low investment returns.

“We expect market conditions to remain weak [next year], while company valuations have remained stubbornly high,” Fitch says.

“This increases the risk that future acquisitions will not generate long-term value – a risk that will only grow as the pool of potential targets shrinks.”

AM Best says the rapid pace of change in the reinsurance industry has given way to a “new reality”, shaped by abundant capacity from traditional and alternative sources.

Many observers believe these changes are more structural than cyclical, its annual report on the industry said.

“The new reality for the reinsurance market looks to be more of an industry where returns are less impressive and underwriting will have to become a larger contributor to profits and returns,” AM Best VP Robert DeRose says.

“This will lead to more conservative risk selection, more diversification of product offerings, a wider geographic reach and conservative loss picks.”

Gen Re Chairman and CEO Tad Montross says one of the big questions at the Reinsurance Rendezvous was whether present conditions are the “new normal”.

And Aon Benfield CEO Bryon Ehrhart says if the market is still experiencing cycles, they are shorter than they used to be.

“As for whether or not the soft market has bottomed out, I see the pace of decreases definitely slowing. But has it hit bottom? That remains to be seen.”