This white paper explores the evolving impact of 2025 global tariff revisions on the insurance sector. It synthesizes recent market observations, premium trends, sectoral analyses, and claims cost escalations to offer insurers, underwriters, and policymakers a forward-looking roadmap. Drawing from empirical data and analysis by Swiss Re, BCG, Fitch, and others, we identify inflation-driven claims surges, investment volatility, and fragmentation of cross-border insurance dynamics as key challenges. A change in tariffs brings with it changes in the underlying fundamentals of risk for the insurance sector. Factors such as rising volatility, liquidity pressures, and higher haircuts increase the probability of stress for the sector as a whole.

Tariffs have historically played a role in protecting domestic industries. However, the 2025 wave of tariff implementations has had far-reaching consequences beyond trade—particularly for the insurance industry. This paper provides an analytical breakdown of these effects across operational and financial dimensions. For instance, a simple 20% tariff on imported auto parts not only affects vehicle manufacturers but also insurers who now face significantly higher claims payouts for car repairs.

Rising Claims Costs

Tariffs on essential components like semiconductors and auto parts have driven up the costs of repairs. Imagine a mid-range sedan that previously required $1,000 to fix after a fender-bender—due to parts inflation, that same repair may now cost $1,300.

• Claims costs for auto insurance have risen between 6–10%, with projected increases as high as 19% in certain cases (Bricker Graydon, Everest Group).
• P&C insurers dealing with electronics, construction materials, or machinery have also experienced upward cost pressures due to increased import duties on raw materials.

Slowing Premium Growth

With tariffs disrupting global supply chains and increasing production costs, consumer purchasing power is weakening. Slower economic growth means fewer people and businesses are purchasing new policies.

• According to Swiss Re’s Sigma report (2025), global insurance premium growth has dropped to 2% from 5.2% in 2024.
• Life insurance premium growth fell from 6.1% to 1%; non-life from 4.7% to 2.6%.
• For example, a construction firm in Southeast Asia may postpone new projects due to rising steel prices, leading to reduced demand for construction and liability insurance.

Pressure on Underwriting Margins

Insurers are caught between rising claims costs and market resistance to premium hikes. In such a scenario, profitability from underwriting erodes.

• Combined ratio deterioration due to elevated loss costs.
• Migration toward lower-cost, lower-coverage policies by price-sensitive customers.
• Insurers are compelled to reevaluate their risk appetite and pricing strategies (BCG). For instance, a regional insurer might reduce its exposure to high-risk auto portfolios and shift focus to niche markets like cyber insurance.

Investment Returns and Volatility

Insurers rely heavily on investment income to offset underwriting losses. However, market uncertainty caused by tariffs results in volatile bond yields and equity returns.

• Fluctuations in bond yields and equity performance are affecting solvency margins.
• IPO and M&A slowdowns, linked to geopolitical trade uncertainties, reduce investment return opportunities (Fitch).
• Currency instability has impacted global investment portfolios. A European insurer investing in Asia could face FX losses that eat into overall returns.

Sector-Specific Observations

Some insurance lines are impacted more than others:

• Motor Insurance: Most acutely impacted due to part-based inflation. For example, replacing a bumper that cost $400 pre-tariff may now cost $550.
• Trade Credit, Marine Cargo & Surety Insurance: Demand increasing due to elevated cross-border risk perception. A logistics firm shipping goods between Asia and the U.S. might now purchase more comprehensive cargo insurance.
• Construction Insurance: Suffering both cost inflation and reduced activity volume. Higher cement prices delay projects, shrinking the pool of active insurable projects.

Risk Fragmentation

Tariff tensions encourage localized sourcing and friend-shoring. While this creates regional insurance growth, it also leads to a disjointed global risk landscape.

• Smaller economies may find it harder to access affordable reinsurance.
• For instance, an African startup importing medical devices may face higher insurance costs or reduced coverage options compared to their Western counterparts.

For Insurers:

• Implement dynamic pricing models to keep pace with claims inflation.
• Diversify investment portfolios to hedge against tariff-induced volatility.
• Develop region-specific products aligned with reshored supply chains.
• Use predictive analytics to flag potential claims inflation hotspots.

For Policymakers:

• Enhance clarity on trade-related financial impact reporting requirements.
• Encourage cooperation between reinsurers to reduce global fragmentation.
• Consider temporary policy interventions (e.g., subsidies or backstops) for highly exposed sectors.

The global insurance landscape is undergoing structural stress from tariff-induced inflation, claim cost hikes, and investment instability. However, as with every disruption, there are opportunities. Insurers that recalibrate their pricing, risk management, and capital allocation strategies stand to benefit from emerging regional demands and differentiated coverage models.

• Bricker Graydon. “The Impact of Tariffs on the Insurance Industry.”
• Everest Group. “Rising Tariffs, Rising Claims: How P&C Insurers Can Stay Ahead.”
• Boston Consulting Group. “Tariff Implications for U.S. Insurance Sector.”
• Swiss Re Institute. “World Insurance: Riskier, Fragmented World (Sigma 2/2025).”
• Insurance Journal. “Tariffs Slow Global Economic & Insurance Premium Growth.”
• BeInsure. “Impact of Tariffs on Global Insurance.”
• Baker Tilly. “Tariffs and the Insurance Industry: Strategic Impact.”