A traditional soft market is coming, as alternativecapital-driven pricing pressure in the reinsurance market flows tothe primary market, a recent Nomura report contends.

Nomura analysts Clifford Gallant and Mathew Rohrmann say in thereport—titled “The Evolution of Reinsurance: Soft Market to SpurM&A”—that one impact of the growing alternative-capitalpresence will be further price weakening in property/catastrophereinsurance rates, followed by weakening across all reinsurancelines, before finally affecting primary-commercial rates.

“We have already seen a slowdown in primary-commercial rateincreases despite the ongoing pressure of a low-investment-yieldenvironment,” states the report. “Much as we have seen ingenerations of previous cycles, we expect that the availability ofcheap reinsurance will exacerbate the fight for market shares atthe primary level, leading to a traditional soft market.”