Commercial insurance pricing is cyclical, and the top of the hard market cycle appears to be at hand. While traditional cycle models point the finger at the availability of capital and the basic rules of supply and demand, this is only one driver.
Executive Summary
During the period 2013 through 2018, the U.S. did not become less litigious nor did Atlantic sea surface temperatures get less warm. Yet rates for U.S. excess liability and Atlantic hurricane both reduced, observe the co-founders of UWX. Here, they describe the human factors driving cyclical behavior.Even more impactful are the human factors at work, as the market well knows. The cycle has its own logic and is much more rooted in herd mentality—group behaviors grounded in a need to belong and be recognized.
These behaviors can and should be spotted, tracked and actively managed. They affect management as well as underwriters and are evidenced, for example, by insurers and reinsurers all looking to grow or cut back at the same time.
