Chapter 5

Question 1

Key Term: A phase of the insurance market cycle in which insurers reduce the amount of coverage they are willing to write, causing supply to shrink and premiums to rise. A hard market can occur as a result of very large, unexpected losses that cause a depletion of capital within the insurance and reinsurance sectors. A hard market may also arise from a gradual lowering of underwriting standards that occurs during a soft market cycle, leading to a greater loss of experience over time.

Answer 1

Hard Market

Question 2

Key Term: A phase of the insurance market cycle in which insurers increase the amount of coverage they are willing to write, causing supply to increase and premiums to fall.

Answer 2

Soft Market