4 - The insurance Cycle

Question 1

What is the term given for a market where supply equals demand?

Answer 1

Equilibrium.

Question 2

If a particular class of business is profitable, more insurers decide to write that class of business, What impact is this likely to have on rates?

Answer 2

Rates will decrease.

Question 3

After a major natural disaster, many insurers will stop writing business. What impact is this likely to have on rates?

Answer 3

Rates will increase.

Question 4

What is a hard market?

Answer 4

When demand exceeds supply, insurers have more ability to influence rates.

Question 5

What is the most likely impact on the market if a catastrophic loss is suffered?

Answer 5

Lower capacity and higher premiums.