What's Happening?
Swiss Re has released a report indicating that U.S. tariff policies are contributing to a slowdown in global economic growth and insurance premium growth. The report forecasts a decrease in global GDP growth to 2.3% in 2025 and 2.4% in 2026, down from 2.8% in 2024. The insurance industry is expected to follow this trend, with total premiums slowing to 2% in 2025 from 5.2% in 2024. The report highlights that U.S. tariffs are creating new risks for insurers, impacting inflation, trade, supply chains, and economic growth. The property/casualty sector is experiencing decelerating premium growth due to softened insurance pricing and policy uncertainty.
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Why It's Important?
The implications of U.S. tariffs are significant for the insurance industry and the broader economy. The slowdown in premium growth could affect insurers' profitability and their ability to cover rising claims costs. The report suggests that U.S. motor and construction claims will be most directly impacted, although the effects are expected to be manageable. Outside the U.S., tariffs may be disinflationary, reducing pressure on claims. The report also notes potential opportunities for underwriting growth in areas like credit and surety insurance, as heightened risk awareness could benefit insurers. However, the overall trend points to reduced insurance demand and market fragmentation, which could diminish global risk resilience.
What's Next?
Swiss Re anticipates that investment results will drive profitability in the property/casualty sector over the next three years. The report warns of a stagflationary shock to the U.S. economy due to high tariff rates, which could lead to diminished confidence in the U.S. government and lower growth expectations for major economies. The report emphasizes the danger of geopolitical and economic fragmentation, which could increase claims costs and restrict capital flows, leading to higher insurance prices and reduced insurability of peak risks.
Beyond the Headlines
The report highlights the long-term risks of fragmentation, including reduced international cooperation on global issues like climate change, pandemics, and cyber risks. This could increase global exposures and widen protection gaps, ultimately impacting society as firms and individuals have less insurance coverage.
