Reinsurance pricing will soften for the remainder of this year due to abundant capital and torpid demand, according to Fitch.

Low demand follows several years of below-average catastrophe claims, the ratings agency says.

Declining premium rates and investment yields are expected to weaken profitability, while the sector’s combined operating ratio is expected to deteriorate to 92% from 91.5% last year.

Most Fitch-rated reinsurers have a stable outlook because they are expected to maintain credit metrics in line with their ratings over the next 12-18 months, with capital typically above Fitch’s ratings guidelines.

However, small reinsurers lacking diversified business could receive negative ratings if prices deteriorate much further, while strong capital growth and lack of organic growth is likely to increase share buybacks, special dividends and mergers and acquisitions.

Notable reinsurance mergers and acquisitions so far this year include Sompo’s purchase of Endurance and Fairfax’s move on Allied World.