The reinsurance market remains under pressure from rate declines, low investment yields and the influx of alternative capital, according to a new report from AM Best.

Reinsurers have been delivering solid operating results, although the sustainability of these earnings is “questionable” and continuing pressure could soon lead to “less impressive returns,” the ratings agency says.

“AM Best is doubtful underwriting will become a larger contributor to profits and operating returns any time soon, as underwriting fundamentals continue to weaken and catastrophe losses are inevitable at some point.”

January renewals did not deliver the price stabilisation some had hoped for, the agency says.

“The expectation remains that reinsurance pricing, overall, will continue to be under pressure [this year], given ongoing pressures from alternative capital and the lack of any price-changing event over the past few years.”

Reinsurers that prudently diversify their portfolios and broaden their product and geographic scope are “the best candidates to effectively maintain advantageous market positions”.