What is described by the term "insurance cycle"?

The term "insurance cycle" refers to the fluctuations in the availability and pricing of insurance over time. This cycle is characterized by periods of hard markets, where premiums rise and coverage becomes more selective, as well as soft markets, where competition increases, leading to reduced premiums and broader coverage terms.

Understanding the insurance cycle is crucial for various stakeholders in the insurance industry, including insurers, insurance brokers, and policyholders, as it impacts underwriting strategies, pricing, and the overall market dynamics. During a hard market, insurers may experience greater profitability due to higher premiums, while during a soft market, they may need to compete more aggressively for clients, often resulting in lower profitability.

This cyclical nature is influenced by various factors such as economic conditions, claims experience, regulatory changes, and major catastrophic events, which can all lead to significant shifts in the insurance landscape. Thus, option B precisely captures the essence of what the insurance cycle entails, making it the correct choice.