What defines the underwriting cycle?

The underwriting cycle is characterized by a cyclical trend of pricing shifts between soft and hard markets. A soft market is typically marked by lower premiums, increased competition among insurers, and more favorable underwriting conditions for consumers. Conversely, a hard market involves rising premiums, reduced competition, and stricter underwriting criteria.

Understanding the underwriting cycle is crucial for insurance professionals because it impacts how underwriters assess risk and set prices. During a soft market, insurers may relax their criteria to attract more business, while in a hard market, they may tighten underwriting practices, resulting in fewer offers and higher costs for coverage. This cycle can be influenced by various factors, including economic conditions, trends in loss experiences, and overall market competition. Recognizing where the market stands in the cycle helps insurers and brokers strategize their pricing and coverage offerings effectively.