Tough negotiations on January 1 reinsurance contract renewals have been likened to a “Mexican standoff” by some Bermudian executives.

A report from Keefe, Bruyette & Woods said that the initial post-catastrophic “euphoria” over potential price increases had moderated.

And it also found that Bermudian reinsurers expected only a modest negative impact from US tax reform.

Analysts from the equity research firm met with reinsurers last week. Executives had described the reinsurance renewal season as “late”, the report stated.

KBW analysts Meyer Shields wrote: “Our sense is that firm orders are out for only about 30 to 40 per cent of expected January 1 renewals, with only about 10 per cent bound. The delay is clearly based on different pricing expectations (or hopes) — we heard the phrase ‘Mexican standoff’ more than once.

“We asked whether a late season typically favours buyers or sellers; most executives doubt any clear “rule of thumb” about whether late renewals favour buyers or sellers; one respondent gave a slight edge to sellers, but given widely acknowledged abundant traditional and alternative capital, and flat (rather than increasing) reinsurance demand, we think waiting probably favours the buyers.”

Mr Shields recommends that investors “stay on the sidelines of the Bermudians” until final pricing data emerge on the January renewals, adding that he expected RenaissanceRe and Validus Holdings “to do the best job of identifying opportunities among the industry’s many moving parts”.

On tax reform legislation grinding its way through the US Congress, Mr Shields found the Bermudian companies expected to be hardest hit taking it all in stride.

“With the typical (fully appropriate, we agree) caveats about an as-yet final bill, the Bermudians that currently cede US business to non-US affiliates generally expect an at-worst modest negative impact from US corporate tax reform,” Mr Shields said.

In KBW’s view, “the key issue is a levelling of the competitive pricing field relative to domestic (re)insurers that previously had to incorporate a 35 per cent tax rate on expected underwriting profits within their pricing, rather than a specific material negative impact to the Bermudians”.