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HARD MARKET Definition & Legal Meaning

Definition & Citations:

An INSURANCE market cycle where INSURERS reduce the amount of coverage they are willing to write, causing supply to contract and PREMIUMS to rise. A hard market can occur by the onset of very large and unexpected losses (i.e., CATASTROPHIC HAZARDS, CLASH LOSS, SHOCK LOSS) that causes a depletion of CAPITAL within the insurance and REINSURANCE sector; relative lack of capital creates a shortfall in RISK CAPACITY. A hard market may also arise from a gradual lowering of UNDERWRITING standards occurring during a SOFT MARKET cycle, leading to a greater loss experience over time.


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