The wave of mergers and acquisitions (M&A) among reinsurers is expected to continue as they seek ways to trump rivals and build growth prospects, according to Fitch Ratings.

But not every deal is a definite winner, the ratings agency warns in its latest report on the global sector.

“Given the soft market conditions, reinsurer consolidation is likely to continue as companies consider M&A to combat market stress and limited organic growth opportunities.

“While some consolidation might be a slight credit positive for moderating competitive pressures, Fitch is likely to negatively view deals where achieving greater scale and diversity is the singular purpose… and strategic rationales are unconvincing.”

M&A deals that have closed or are near closure include multibillion-dollar acquisitions by Renaissance Holdings, XL, Fairfax, Endurance, China Minsheng Investment and Exor.

Fitch says there are signs rate declines suffered by the reinsurance sector may be slowing, and pricing is probably “approaching a new equilibrium”.

Pricing has come under pressure amid inflows of alternative capital from private equity firms, hedge funds and pensions plans.

“However, the flow of alternative capital is slowing slightly… [and] insurance-linked securities pricing has also stabilised recently,” the report says. “Fitch believes this means capital market investors may have a waning appetite for reinsurance risk.”