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Hard Market

Point in the insurance cycle where demand for coverage is greater than market capacity, resulting in increased pricing of insurance and reinsurance. 

 

Insurance cycles can vary by line of business and geographically.  The property market in Texas may be hard at the same time the professional liability market is soft.

Hours Clause

Not usually a separate clause in a reinsurance contract, but included as part of the Occurrence definition and most commonly seen in Property reinsurance contracts.  It limits the time period during which claims resulting from a given occurrence may be included as part of the loss subject to the reinsurance. The time period is usually measured in consecutive hours.

 

Discussions and negotiations regarding Hours frequently concern windstorm, other natural disasters, and riot/civil commotion. 

Example:

A hurricane makes landfall at 12:01 AM on September 1st.  The storm causes multiple losses to structures insured by ABC Insurance Company as the storm moves up the coast, as follows:

Loss Date Time Amount
#1 9/1 2:45 AM

$1,000,000

#2 9/2 4:02 PM

$800,000

#3 9/3 9:09 AM

$950,000

#4 9/4 1:45 AM $1,200,000
#5 9/4 8:45 PM

$1,500,000

 

If ABC Insurance Company's property catastrophe reinsurance program contained a 72 Hours Clause, losses #1 through #4 would be subject to the reinsurance.  Loss #5 would not be subject, as it occurred more than 72 hours after the first loss incurred by ABC Insurance Company.  The clock starts ticking at the time of the first loss.  In this example, a $5,000,000 XS $2,000,000 Property Per Occurrence Excess would be liable for $1,950,000 of loss ($3,950,000 - $2,000,000)