Global reinsurers’ investment returns are contracting rapidly, with the weakening trend set to continue, according to the latest report from S&P Global Ratings.

Their investments could yield less than 2% by next year, and the level of realised and unrealised capital gains could gradually reduce as bonds held by reinsurers mature.

“We expect strong enterprise risk management and increasing risk-return considerations to encourage reinsurers towards increasingly efficient deployment of capital resources to support yields from their investment profiles,” S&P says.

However, market conditions are limiting the options available to reinsurers as they strive to bolster their results.

“We expect to see only a marginal increase in asset risk, with prudent asset allocation and strong asset quality continuing to support reinsurers’ overall financial strength.”