At Standard & Poor's annual Insurance Conference on June 4-5th, reinsurance executives said that money is expected to keep flowing into the industry, putting downward pressure on pricing and impairing returns.

"That flow of capital into our business in search of higher returns is inevitable," commented John Charman, chairman and CEO of Endurance Specialty Holdings. "It's created a more-competitive landscape, and it's also changed underwriting behavior," he said, explaining that reinsurers are attaching sidecars to their underwriting business.

Dinos Iordanou, chairman and CEO of Arch Capital Group, believes that the business is still healthy even with pricing down by 10% to 15%. However, he suggested that, based on the industry's current dynamics, a there could be a "frenzy of competition". "To tell you the truth, I don't know the end of it. There's no indication of prices stabilizing," he said.

Mounting competition could have a negative effect on reinsurers' profitability, and S&P analysts changed their outlook for the sector from stable to negative earlier this year. "We think that companies without a defendable competitive position, or those that are more aggressive in maintaining market share by competing on price or relaxing their underwriting discipline, are most at risk," they say.

Andrew Rickard