March 03, 2023 | Earthquake | Flood | Hurricane | Insurance Coverage | Risk Mitigation

The Cycles of the Insurance Market

The insurance industry is cyclical, and each cycle can span several years. We are currently in what is known as a “Hard Market.”

In a Hard Market, there is high demand for insurance coverage but a low appetite to insure. This low appetite generally comes from capacity constraints. Capacity can be thought of as an insurer’s inventory. Carrier partners determine capacity, which is based on several factors, such as the number of natural disasters, insurance payouts, and things like social inflation.

Preceding a Hard Market, many events, like an increase in natural disasters, have resulted in greater payouts and poor investment returns. Poor ROI causes investors to tighten the amount of capacity they want to put in the insurance industry.

With tighter capacity, more restraints, and “less inventory,” insurers must tighten up on what properties they will underwrite, and premiums begin to rise. With more stringent underwriting and less competition1, ROI increases, and we enter what is known as a “Seller’s Market.” This puts us in between a ‘Soft’ and ‘Hard’ market.

Substantial profits begin to attract new investors and fresh capital, meaning more capacity1. More capacity gives insurers more wiggle room to write business, rates start to fall and the insurance industry enters what is known as a “Soft Market.” In a Soft Market, insurance is readily available, and rates are stable because of healthy competition in the market.

While there is no set timing of when a hard market will end, it won’t last forever.

Want to know what you can do to help yourself or your clients navigate a hard market? Check out our ‘Navigating a Hard Market’ blog.

Don’t forget to download our ‘Inflation’s Impact on Premiums’ Brochure.

1. Meakin, Tony. “Understanding the current insurance cycle | Lockton.” Lockton, 27, October 2020,

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