The outlook for merger and acquisition activity in the global reinsurance sector is stalling amid the dimming economic outlook, says Fitch Ratings.

In a new report, the rating agency said that M&A transactions among reinsurers will likely be limited until 2023 due to heightened investor concerns over macroeconomic risks and elevated losses in the sector linked to climate change.

“We expect reinsurers to prioritize pricing, risk management and organic growth rather than M&A as they contend with the implications of the economic slowdown, high inflation and volatile financial markets,” Fitch said.

Even if reinsurers are able to boost profitability through higher prices, Fitch said it doesn’t expect increased M&A activity in the near term.

“For traditional reinsurers, opportunities to increase pricing and improve profitability could develop if rising interest rates lead to lower supply of alternative capital to the reinsurance market, most of which is through insurance-linked securities,” it said.

Already, investors in insurance-linked securities have pulled back from the market, Fitch noted, after suffering “several years of above-average catastrophe losses” amid increasing weather and climate-related events.

This trend could lead to reinsurers to raise prices in order to boost profits.

In the meantime, M&A has “proven challenging,” the report said.

For instance, in April, it was reported that AXIS Capital was looking to sell its large reinsurance business.

“The company eventually abandoned the sale in June due to limited market interest and instead decided to discontinue its property reinsurance business to significantly reduce its catastrophe exposure,” Fitch said.

Similarly, a unit of French giant AXA “has significantly reduced its property catastrophe exposure in recent months,” it said.