North American insurers are bracing for the impact of tariffs imposed by US President Donald Trump last week. Insurance groups from the US and Canada anticipate rising costs to push up rates for consumers.
“Tariffs will have an impact on insurance as they add additional costs to the goods used in replacing and repairing homes, cars and businesses,” the Insurance Bureau of Canada (IBC) said in a statement to Insurance Business.
“While we don’t yet have a precise picture of the scope of these effects, over time, tariffs will hurt consumers and families on both sides of the border.”
According to IBC’s early analysis, tariffs have the potential to affect all lines of property and casualty (P&C) insurance, with auto insurance expected to take the biggest hit.
“Auto insurance is likely to be more impacted due to the highly interconnected nature of Canadian and US auto and auto parts supply chains,” said IBC. “However, home insurance may be impacted as well due to likely increases in the cost of materials used in replacing and repairing homes.”
It’s not just personal lines insurance that will receive sticker shock after tariffs take effect. The Lloyd’s Market Association (LMA), the representative body for all Lloyd's managing agents, warned that the tariffs will increase uncertainty and risk across many areas of business. The association has recently made a push into North America, which holds roughly 58% of its total market.
“There is no doubt we are living in unpredictable times and even looking at a 12-month insurance contract could feel as if we are trying to predict a long way ahead,” said Elizabeth Wooliston, LMA underwriting director.
Rising costs of parts and materials translate directly to higher claims costs. For insurers, that may mean recalibrating premiums or adjusting cover limits to avoid an unsustainable squeeze on margins.
“At its most basic level, if tariffs make goods and spare parts more expensive, insurance claims will in all likelihood rise,” Wooliston said. “This could mean that premiums may have to increase or cover may be decreased.”
Wooliston also points out a more subtle, yet potentially disruptive consequence: regulatory ambiguity. “The imposition of tariffs could also create ambiguity regarding their application,” she said. “While primarily intended for the automotive sector, tariffs could also affect sectors such as renewables.”
That ambiguity could ripple through supply chains, already stressed by geopolitical shifts and post-pandemic adjustments. For brokers, there’s a renewed focus on ensuring clients aren’t left underinsured as replacement costs climb.
“In the US, as the end-price of goods is likely to rise, the most obvious and immediate concern for insurers will be managing their ‘value at risk’, with brokers paying close attention to avoid underinsurance for their customers,” Wooliston said.
Mark Friedlander, senior director of media relations at the US Insurance Information Institute (Triple-I), agreed that the consequences of the new tariffs won’t stay confined to trade stats.
“The new tariffs announced this week, which will impact imported vehicles and auto parts, are expected to inflate the cost of new cars, repairs and used car values due to tight profit margins for manufacturers and the interconnected global supply chain,” Friedlander said. “This could generate higher premiums for home insurance and business insurance, in addition to auto insurance.”
Some insurers are already bracing for premium hikes, but not all customers will feel the pinch right away. Friedlander said auto insurance rates shouldn’t change until their policy is up for renewal. “Some auto insurers have indicated the tariffs could lead to higher premiums by the end of 2025,” he said. “No premium changes will be implemented on existing policies.”
The broader economic implications aren’t lost on the industry. According to Triple-I, the scale and targeting of the tariffs will shape how deep the disruption runs.
“Tariffs in the single digits aim to transform a supply chain but double-digit tariffs are intended to replace supply chains,” Friedlander said. “Because the new tariffs are attaching to specific supply chains, we expect they will likely have a lesser impact than during the broad supply chain disruptions caused by the COVID-19 pandemic.”
Back in Canada, the IBC isn’t waiting to see how it plays out. Canadian insurers are already seeking ways to soften the blow, including seeking substitutes for American goods in their supply chains.
Despite the gathering headwinds, the Canadian P&C sector remains steady for now.
“Canada’s P&C insurance industry is strong and stable and will be there for Canadians, regardless of the effects of tariffs on claims costs,” said IBC. “Canadians can depend on their insurer to continue to protect what’s important to them, and to be there should disaster strike.”
It also expressed support for Ottawa’s diplomatic posture. “IBC commends the federal and provincial governments as they stand up for Canadians and work closely together to put the interests of Canadians first,” IBC said.
What is your organization doing to mitigate the shock of tariffs? Please share your comments below.
