The rating outlook for the global reinsurance sector has been held at negative by AM Best. The operating environment is "concerning" despite signs that rates are bottoming out, it added.
The rating agency said companies that fail to address the pressure on profits will not stay the course.
"The companies that are not proactive will not lead their own destiny," AM Best said. "Several franchises that exist today will be sporting the logo of another brand by the time this soft market has run its full course," it added.
The rating agency sees little potential for positive rating actions given the strain on reinsurers' profitability driven by low investment returns, low rates, and broader terms and conditions. At the same time, alternative capital is adding pressure to traditional reinsurers and has taken a 20% share of global reinsurance capacity.
AM Best said that although reinsurers are currently well-capitalised, over a prolonged period of time earnings will come under pressure and reserves will decrease.
"These issues have placed unrelenting pressure on underwriting discipline, forcing insurers to exercise restraint or risk long-term viability," said Robert DeRose, senior director at AM Best, adding that such companies will become acquisition targets during a prolonged period of soft rates.
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