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30th June, 2021

What is a ‘hard’ market?

The cost of insurance is always fluctuating, much to the frustration of clients and you may be wondering why.

Insurance premiums are increasing and it’s getting harder to obtain quotes for cover.  This is because the insurance market is hardening. What does this mean?

The insurance market is a highly cyclical market, meaning it goes through periods of hardening and periods of softening. A soft market is characterized by lower rates, higher limits and more easily accessible cover. A hard market on the other hand, can be characterized by premium increases and lower capacity in terms of cover limits and insurer appetite, especially for risks and / or occupations that fall outside of the “box”.

The insurance industry has been experiencing a hardening market for the last few years. Today we are well into a hard market cycle, across almost all insurance lines and affecting the majority of industries. It has been predicted that the hardening market will continue and premiums increasing in the foreseeable future.

There are different factors which can set the insurance cycle into a hardening market and these can include:

  • Poor investment returns and low interest rates
  • Increase in frequency and cost of losses
  • Cost of reinsurance

In recent years we have seen all of these factors play a part in the hardening of the market. We’ve seen unprecedented natural disasters locally and abroad, record low interest rates and return of investments, a global pandemic resulting in a global economic downturn – all of which affect the local insurance market, but also the global insurance market, and therefore the cost of reinsurance.

What can you do about it? The first thing is to be aware. To be aware of the cyclical nature of the insurance market and the hardening of the market that we are in, and then be prepared. Be prepared to work with your broker to answer more questions about your situation and/or your business. The more information provided can sometimes make the difference between being able to obtain a quote for cover vs having quote requests declined across the board. Be prepared for increases to premiums and maybe even for reductions in cover limits.

Please contact our team, if you or another business owner you know of, is struggling to navigate this issue. As your broker we are here to support you through these challenges in providing solutions to your risk management requirements.

Author: Murray Bruce