Tariffs and geopolitical tensions are reshaping the business landscape, with potentially significant implications for insurance costs. As trade risks escalate, businesses are grappling with rising costs, supply chain disruptions and increased litigation risk. Understanding these impacts and taking proactive steps can help your organization navigate the challenging terrain of tariff-related insurance challenges.
Tariffs could affect insurance prices by increasing the costs of materials and supplies, which can lead to higher premiums. This impact could be particularly notable in property insurance, where the cost of replacing buildings, machinery and equipment may rise.
But tariffs’ impact on pricing isn’t limited to property insurance. They can strain supply chains and profit margins, leading to increased litigation risk and higher general liability (GL) premiums. The potential for tariff retaliation and the resulting economic tensions can also contribute to higher insurance costs.
Insurance carriers are responding to this market uncertainty by intensifying their scrutiny of production, investments and financial performance and looking at policy terms and conditions more closely.
Current Replacement Cost Index inflation factors have significantly declined from their peak during the 2021–22 inflationary period. Yet the recent imposition of wide-ranging tariffs is likely to disrupt supply chains and increase import costs. These factors could reignite inflation in the post-loss replacement of buildings, machinery, equipment and contents.
Given recent discussions on tariffs between world leaders, clients should review their policy wording and the adequacy of limits.
WTW is closely monitoring changing tariff policies and their impact on the cost of materials and repairs, which may drive insurer claims expenses upwards — and premiums higher.
While tariffs themselves and not generally covered by political risk insurance, countries could retaliate through non-tariff measures, which may be covered. For example, in retaliation for the recent tariffs on China, additional American companies have been placed on China’s Ministry of Commerce’s Unreliable Entity List (UEL). If the punishments are enacted, such businesses could be unable to import or export to China. They could also face license cancellation, personnel travel bans and other items.
To help mitigate the impact of tariffs on insurance costs, there are several steps organizations can take:
By taking these steps, your business can better prepare for the range of different scenarios that tariffs may bring, ensuring it is well-protected and financially stable.
Tariffs and geopolitical tensions are creating a complex and dynamic risk environment for businesses. By understanding the current state of trade, evaluating the specific impacts on different types of insurance and taking steps to prepare, you can better manage insurance costs and protect financial stability. Working closely with brokers and leveraging analytics can provide the insights needed to navigate these challenges effectively.
WTW hopes you found the general information provided here informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
