Soft market

Property-liability insurance markets have been characterized historically by “soft” markets, in which prices are stable or falling and coverage is readily available, followed by “hard” markets, in which prices rise rapidly and availability declines.

Insurers are reluctant to pay out retained earnings during soft markets because of the difficulty of raising capital again when the market enters the next hard market phase, leading to excess capcaity and downward pressure on prices.

Underwriters who had already submitted their quotes at soft market prices wondered if it would be necessary to abide by those low quotes.