man looking at trends through binoculars

Insurance Market Cycles: Hard vs. Soft Markets

Regardless of the industry you are in, anyone can experience growth and losses. The insurance industry is not different.

These mark cycles can often differ from one another, therefore it’s worth knowing more about them.

Typically, insurance industry cycles will last anywhere between two to ten years. However, as the market cycles rely on the way the world is operating, amongst other things, how has COVID impacted this industry?

In this article, we’ll discuss what insurance market cycles are in more detail and how hard and soft markets differ.

What Are Insurance Market Cycles?

Insurance market cycles are market-wide fluctuations that vary. A soft market is where there will be increase competition or perhaps depressed premiums and then this type of market is usually followed by a hard market.

A hard market is a period of rising premiums, and decreased capacity. It’s worth knowing that market cycles in the insurance market will usually have an effect on each other.

For example, when you have more capacity in the market, you have more supply, and that can exceed demand. This demand has a knock-on effect to the premiums, so on and so forth. It’s important to see where the market is for businesses who work in the insurance industry.

This year has certainly been one for the books and has impacted most industries in different ways. So, when it comes to insurance market cycles, COVID has certainly had an impact.

What is a Hard Market vs. a Soft Market?

Before looking at the effects that COVID-19 has had on the market, it’s important to know more about the soft and hard markets and what makes them different.

Soft Market

For a soft market, you usually tend to see lower insurance premiums, a broader coverage and a relaxed underwriting criteria which can be helpful for those who are claiming or taking out insurances.

It entails an increased capacity, meaning those who take out insurance have more policies to choose from and higher limits to cover themselves. That, in turn, increases the amount of competition between insurance carriers.

Hard Market

With a hard market, you’ll tend to see higher insurance premiums, more difficult underwriting and less competition, which could make it a positive for insurance carriers.

These higher insurance premiums will make it tough on those who have the insurance, and as such, they’ll likely try to look elsewhere for a better deal.

So what is the market currently? Well, for the most part, it seems to currently be in a length soft market state according Reinsurance News.

However, Alex Maloney, the Chief Executive Officer (CEO) of Lancashire Holdings Limited stated that the start of 2021 could see the start of the market hardening due to the effects of COVID-19 to some extent.

How has COVID-19 Impacted the Insurance Market Cycles?

There are various factors that have impacted the insurance cycle, but COVID-19 could have certainly been a factor that has impacted it the most.

With many businesses facing collapse, individuals losing their jobs and the health of the world being what it is, with people losing family or being sick off work, claims are likely to be high.

The pandemic has certain highlighted coverages that are included in contracts, and insurers have been impacted when it comes to insurance claims and investment losses.

Even though COVID-19 has intensified the situation of the market as it is, there are other factors that are worth mentioned and that have perhaps contributed to the creation of the hard market we may now see.

How Else Can They be Affected?

A string of natural disasters that have been combined with the global pandemic has certain comprised and impacted the insurance market cycle.

Natural Disasters

From fires to hurricanes and extreme weather, it’s certainly contributed to insurance claims. There have been some severe sandstorms, for example, that have resulted in a lot of issues losses.

Most recently, the fires that have occurred and continue to occur in California are just an example of how these natural disasters can contribute to the market shifting from a soft market to that of a hard one.


With lawsuits, those who take legal matters to a court are certainly getting payouts that will affect the insurance market. The more lawsuits created, the more it can contribute.

For example, the opioid crisis is one that could turn into more lawsuits and therefore, more costs for the insurance providers.

Increase In Claims

And as it’s already been mentioned, the increase in claims over the years has certainly been disastrous for the market. The more disasters and life impacts that have happened in the world, and due to COVID, have all contributed to more claims against insurance policies being made.

Handling the Insurance Market in a Business or Personal Approach

Whether you’re a business or you’re seeking personal insurance, navigating the market can be a little challenging. There can be so many suppliers of insurance that you might find it difficult and challenging to find the right provider.

That being said, it’s worth using the services of someone like Central Jersey Insurance Associates and their brokers. Brokers are great for finding deals that suit your needs and requirements without you needing to do a thing but provide them the information they need to find the best one.

Regardless of what you’re after, it’s important to find someone who can help you navigate the insurance market cycles, whatever that might be. A broker can certainly be a helpful service to pay for.

The insurance market seems to be heading straight for a hard market, but who knows when it will end. That seems to be an answer that is difficult to predict at this current time.