@Dan144
I used to have strict, and in the couple of years I'd been hosting I only had a few bookings cancelled due to illness or other reason.
I fairly chose to refund those guests - either fully or minus at least a prepping charge if a day in advance. Or the one time it had been booked and off the market for ages, then cancelled a week or so in advance I offered refund for any nights I managed to get rebooked on such short notice (which I did an hour later!).
With that experience I switched strict to moderate end last summer to test it. However, bookings since then have for me been quite slow to nonexistant, so can't say yet if it makes much of a difference.
However, in my experience and with Amsterdam an expensive tourist city, guests would only cancel due to a real problem, considering that it's difficult to get a fair-priced accommodation during main season plus they lose out on their booking fee.
And with my always try to be fair regarding refunds, I think that moderate won't really make much of a difference to me personally.
Towards the end of the year with bookings falling off I decided to give 'flexible' a try to hopefully entice guests, and I'm sure it was a positive move towards any potential guests if there had been any, but there too like most hosts outside the touristic old center the terribly slow booking season hardly got me a booking at all. So again no statistics to show there either 😉
With the spring looming I've turned it back to 'moderate'. Test is ongoing!