In a sudden and partial de-escalation of trade tensions between the United States and China, both countries have agreed to a 90-day suspension of their steepest tariffs. While temporary, the move has already prompted a rush of commercial activity - with implications that extend far beyond retail, deep into the workings of the global insurance industry.
The agreement, which lowers US tariffs on Chinese goods from 145% to 30% and China's tariffs on U.S. imports from 125% to 10%, is aimed at easing trade friction and reigniting stalled supply chains. But the ripple effects are now being closely watched by insurers, who find themselves navigating an environment of economic uncertainty, supply chain bottlenecks, and cost inflation—all of which bear directly on claims, underwriting, and portfolio management.
The temporary reprieve brings immediate, if modest, relief to US carriers facing the prospect of surging claims inflation. Steep tariffs would have raised the price of imported goods - especially auto parts and construction materials - thereby inflating the cost of claims in motor and property insurance lines.
A recent analysis by the American Property Casualty Insurance Association estimated that tariffs alone could add between $7 billion and $24 billion to annual auto insurance claim costs in the United States. Though the reprieve doesn’t eliminate those pressures, it offers a window in which repair costs will hopefully remain steady, helping insurers avoid widening loss ratios.
Similar pressures have been facing property insurance. Tariffs on construction essentials like timber and steel have driven up the average cost of home rebuilds. For UK-based reinsurers with exposure to the U.S. market, the short-term price easing could ease the strain on combined ratios - though the benefits may be short-lived.
Despite the brief moment of clarity, the underlying volatility remains. Tariffs are still at elevated levels, and the 90-day horizon has done little to reassure markets or business leaders. Retailers and manufacturers are now scrambling to bring goods into U.S. ports before the window potentially closes, further stressing shipping infrastructure and raising container prices.
This volatility has direct implications for insurers. Persistently higher claims costs, driven by tariff-fuelled inflation, are likely to feed through to premium increases. From an actuarial standpoint, pricing models will need to be continually recalibrated as insurers grapple with both supply-side inflation and the unpredictable cadence of international trade policy.
For insurers, the consequences extend beyond underwriting. Trade-driven market volatility poses a risk to investment portfolios - particularly for life insurers and large general insurers with exposure to equities and corporate bonds.
According to AM Best, U.S. property and casualty insurers with significant equity holdings may face capital deterioration during periods of tariff-induced market swings. For global insurers headquartered in London or Zurich with cross-border investments, this adds another layer of complexity to risk and capital management.
With lowering interest rates threatening to suppress bond yields, insurers may be compelled to lean into higher-risk assets. But the geopolitical uncertainty surrounding global trade has increased downside risk, prompting a reassessment of asset allocations.
Beyond the 90-day reprieve, structural shifts in global supply chains are likely to continue. Several U.S. companies are already accelerating moves to shift production out of China and into markets such as Vietnam and India - a trend with long-term implications for trade credit insurers, logistics underwriters, and political risk carriers.
For insurers providing coverage in trade-sensitive sectors, there is a growing need to anticipate and underwrite around shifting geopolitical alliances and regulatory regimes. The transient relief afforded by the current truce does not eliminate the underlying unpredictability of trade policy under a volatile political climate.
While the temporary easing of tariffs provides a brief window of stability, it does not alter the broader trajectory of economic friction between the world’s two largest economies. For insurers - particularly those with global exposure - the challenge lies in responding nimbly to short-term shifts while preparing for structural changes that will reshape the landscape of international commerce.
Insurers must navigate these complexities not only with more agile underwriting practices but also with increasingly sophisticated financial risk modelling. In an era where geopolitical instability increasingly intersects with operational risk, the industry must recalibrate its assumptions and remain prepared for whatever follows once the 90 days are up.
