Hard market / Soft market

Hard market and soft market denote the two opposing phases of the underwriting cycle that characterizes insurance and reinsurance markets. In a hard market, insurers and reinsurers tighten their terms: premiums rise significantly, available capacity contracts, exclusions multiply, sub-limits fall and underwriting criteria tighten. This hardening generally follows a claims shock (major catastrophe, ransomware wave, prolonged loss period) or a collective recognition of systemic under-pricing in previous years that has deteriorated balance sheets. In a soft market, by contrast, the influx of new capacity attracted by profitability, competition between insurers and good technical results push premiums down, terms become more flexible and sub-limits increase. For protection buyers, the soft market is favorable in the short term; for insurers, it carries a structural risk of adverse selection if underwriting discipline is relaxed to the point of insufficiently pricing risks. The cyber market went through a particularly illustrative sequence: after a prolonged soft market until 2019, the ransomware waves of 2020 to 2022 triggered a sharp hardening with premium increases of 50 to 200 percent depending on the segment. From 2023, the influx of new capacity and improved results initiated a relative soft market, illustrating the structural cyclicality of the sector. The position in the cycle should inform the buying and renewal strategy for both insureds and cedants.

In 2021, an SME renewing its cyber policy sees its premium triple, its limit halved and new exclusions for double extortion added to its contract. It is in a hard market. In 2024, the same profile obtains stable or even slightly improved terms thanks to the influx of new capacity: the market has softened.

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