Reinsurers will intensify efforts to find new growth strategies as they brace for yet another difficult year after a disappointing January renewal season, S&P Global Ratings says.

The ratings agency expects more mergers and acquisitions, the axing of underperforming arms and diversification into more profitable areas of the industry.

The January renewals did not produce significant price gains, despite two years of above-average catastrophe losses, with global pricing on aggregate flat to 3% up.

“We believe the sector continues to face weak business conditions, despite the slightly improving reinsurance pricing achieved during the recent renewals,” S&P says.

“The improvement was not strong enough to alleviate some of the competitive pressures, as soft pricing endures and the influx of alternative capital will continue to test reinsurers’ business models.

“To defend their competitive positions, reinsurers have pursued transformative and tactical bolt-on acquisitions while enhancing their value propositions, a trend we expect will continue [this year].”

It was hoped rates would spike after last year’s natural catastrophe-driven insured losses of $US80 billion ($111 billion), the fourth-highest on record.

The catastrophe bond market is tipped to grow further as pension funds and other major capital investors become more comfortable with risks such as wildfire and flood.