What Does Market Cycles Mean?

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What does Market Cycles mean? Read on to discover the definition & meaning of the term Market Cycles - to help you better understand the language used in insurance policies.

Market Cycles

Market Cycles

Market-wide fluctuations in the prevailing level of insurance and reinsurance premiums. A soft market (i.e., a period of increased competition, depressed premiums, and excess capacity) is followed by a hard market a period of rising premiums and decreased capacity. Traditionally, each period has a causative effect on the other. For example, in a hard market, insurers' earnings are greater than during a soft market. Large earnings have the effect of increasing capacity. More capacity means more supply. When supply equals or exceeds demand, premiums go down, competition heats up, and earnings begin to shrink. Once earnings shrink to the point where the amount of capacity is reduced, the market hardens up, and the cycle starts all over again.

We hope the you have a better understanding of the meaning of Market Cycles.

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