The U.S. commercial insurance sector and the Bermuda reinsurance sector continue to face challenges after posting mixed second-quarter and first-half financial results so far in 2017, S&P Global Ratings Inc. said in a Tuesday webcast.

In the presentation, “U.S. Life Insurance, Property & Casualty Insurance, and Bermuda Re/Insurance: Sector Earnings and Credit Trends,” analysts laid out some of the headwinds facing the businesses.

Primary commercial insurers are facing challenges that include low interest rates and a diminishing reserve cushion, according to Tracy Dolin-Benguigui, director and sector lead for S&P Global Ratings in New York.

“Pricing continues to be competitive and it is no longer making up loss-cost trends,” Ms. Dolin-Benguigui said during the presentation.

Commercial auto, she said, is “still in need of some pricing” but coming closer to catching up with loss-cost trends, while workers compensation pricing continues to drop in most states, Florida being a possible exception.

As insurers continue to look to mergers and acquisitions as a route of capital deployment, some recent deals have focused on areas like technology and small and medium-sized enterprises, or SMEs.

“SME is a hot area that a lot of companies are talking about,” Ms. Dolin-Benguigui said, pegging the fragmented market at some $90 billion. “That’s an area where we may see future M&A deals.”

The Bermuda reinsurers as a group “actually saw a slight improvement in terms of the first half relative to last year,” said Larry Wilkinson, senior director and analytical manager for S&P Global Ratings in Bermuda.

He said S&P’s Bermuda Tracker shows the industry had about 6% growth in gross written premium and a 1.3% improvement in terms of the group combined ratio in the half. Return on equity remained flat at roughly 8.8%, he added.

Major challenges included the growth of alternative capital in the reinsurance sector as a whole and “a benign catastrophe environment well below the 10-year average of all catastrophe losses,” Mr. Wilkinson said.

While traditional capital grew some 6% to about $519 billion now from about $490 billion in 2013, alternative capital has grown 70% to $86 billion now from $56 billion in 2013, according to Mr. Wilkinson.

“The dramatic increase of alternative capital coming into the space pressures pricing,” Mr. Wilkinson said.

Even in the face of such pressure, mergers and acquisitions among reinsurers have slowed, he said, to just two deals worth about $2.3 billion in 2017 so far from nine deals worth about $15 billion in 2016, as the field of potential targets wanes.

“A lot of small and midsized targets have been cleared out” already, Mr. Wilkinson said.