Global reinsurance pricing continued its downward spiral at the January 1 renewals, affecting almost all lines of business and geographic markets, according to Marsh subsidiary Guy Carpenter.

The trend is largely attributed to a lack of costly catastrophes last year. Global insured losses of about $US30 billion ($37.64 billion) were the lowest in four years and down 25% on 2013, the reinsurance broker’s report says.

Another major driver was the continued flow of third-party capital into the reinsurance market, as institutional investors seek higher yields amid low interest rates.

This trend “continues to reshape the reinsurance landscape’s capital structure”, Guy Carpenter says.

A common feature of the January 1 renewals was clients’ ability to extract “tailored solutions” from reinsurers.

Many achieved broader coverage as a result. The options clients most commonly sought were extended-hours clauses, improved reinstatement terms, the addition of non-modelled lines and greater coverage for terror exposures.

“The demand for more state-of-the-art, client-focused strategies will only increase,” Guy Carpenter says. “Clients will seek assistance with the structuring of alternative reinsurance vehicles, entry into new markets and the creation of new distribution channels and new products to address emerging risks.”

Meanwhile, Willis Group says “relentless rate reductions”, low investment returns and the continued influx of alternative capital “offer no respite for reinsurers”.

In its review of the January 1 renewals, the broker says “reshaping of the global reinsurance industry [is] now starting in earnest”.

Willis Group forecasts a year of mergers and acquisitions. “With only a limited supply of attractive target companies, consolidators looking for scale and diversification are moving as company valuations become more reasonable for both parties.”

Willis Re Chairman Peter Hearn says reinsurers must consider changing their business models and portfolio mixes and attaining scale.

“The new mantra is diversification,” he says. “Whether this is by class or geography – preferably both – reinsurers are being actively rewarded by investors and buyers who see diversification as key to sustainability, along with size.”