There has been no “softening in the softening” of reinsurance pricing, according to a new Willis Re report.

Global CEO John Cavanagh says January renewals dashed hopes the market was bottoming out.

Signs of price stabilisation in property catastrophe during the last June and July renewals had given forecasters false hope, according to the global broker’s View Report.

Mr Cavanagh says while reinsurers will probably report reasonable headline results for last year, “looks flatter to deceive”.

“As the Willis Reinsurance Index for the first half of 2015 demonstrated, underlying returns on investment of reinsurers are at an extremely low 5.1% after adjusting for reserve releases and abnormally low catastrophe losses,” he said.

“[Last year’s] full-year analysis is likely to show further reductions as under-reserving issues start to appear at both a primary company and reinsurer level.”

The report says rates have continued to decline across most markets and reinsurers have faced difficult renewal dynamics in global specialty markets such as aviation and energy.

Casualty markets have offered reinsurers no relief from further rate reductions.

Risk-adjusted reductions continue in property catastrophe pricing, but there has been a slowdown in rate reductions for high-layer US property catastrophe covers where insurance-linked security markets have taken a more disciplined approach.

Some larger companies are continuing to increase their reinsurance retentions, while others are using rate reductions to buy more cover.

The negative outlook for investment income also remains, with concern around dislocation in the high-yield bond market a potential precursor to further turmoil in bond markets as interest rates rise. For most reinsurers, exposure to high-yield bonds is modest and manageable.

The mergers and acquisitions trend continues unabated, with the increasing role of Asian-sourced capital helping to drive valuations.

Mr Cavanagh believes two initiatives should help drive future reinsurance demand.

The first is Lloyd’s plan to launch a trading index to help stimulate development of a secondary trading market and “attract the interest of the wider capital markets”.

The second is the Bank of England’s move to establish an industry-led taskforce chaired by former New York mayor Michael Bloomberg.

The taskforce will develop company disclosures for investors to assess physical, liability and transitional risks from climate change and related policies.