President Donald Trump has announced a 25% import tax on all steel and aluminum imports, marking another escalation of US trade policy that could have global repercussions.
Canada and Mexico are two of the US's biggest steel trading partners, with Canada being the US’s biggest supplier of aluminum. The announcement also comes a week after Trump stopped short of implementing 25% tariffs on imports from Canada and Mexico, offering a 30-day reprieve while pressuring the two countries to act on border security issues.
Uncertainty over brewing trade wars will have a significant impact on insurance, according to Kenneth Saldanha (pictured), insurance lead – Americas at Accenture.
“The short answer is that geopolitical instability is whipsawing (insurance) companies,” Saldanha said. “We’ve seen carriers revise their earnings releases three times in a week based on shifting conditions.”
This hesitation has a ripple effect, causing a slowdown in lines of business that depend on global exposure. Insurers will take on a waiting stance before making big moves.
“Right now, uncertainty is freezing capital commitments, especially for multinational coverage and industries like inland marine shipping,” Saldanha said. “If insurers don’t know where things are headed, they won’t commit underwriting capital.”
Uncertainty doesn’t just stop at underwriting decisions. The broader question is how global economic shifts will affect the insurance industry in the long run. Saldanha pointed out that insurance growth has always been closely tied to GDP, and if global markets get rattled, so do insurers.
“If geopolitical risks trigger a global trade war, GDP could take a hit, shrinking the risk pool and reshaping the industry,” said Saldanha. “Historically, insurance growth mirrors GDP within a few basis points, so any downturn will directly impact underwriting.”
A global trade war is a looming concern. If tariffs escalate or supply chains get tangled, GDP could take a hit, and that would bring about changes in the fundamental risk pool for insurers, according to the Accenture executive.
Faced with this instability, insurance executives are making moves where they can. Since they can’t control market conditions, they’re zeroing in on something they can: costs. “We expect two major effects: a slowdown in multinational underwriting and an intensified focus on cost management as insurers navigate volatility,” Saldanha said.
One area that’s already feeling the squeeze is auto insurance. Tariffs on Canadian imports are expected to hit manufacturing hard, which has direct implications for the insurance sector. The US relies heavily on Canada for auto parts, and if those costs rise, claims expenses will rise with them.
“Ongoing supply chain disruptions – whether from tariffs, COVID-19, or a port strike – are already impacting the industry,” Saldanha said. “These disruptions drive up costs for auto parts, building materials, and other essentials, leading to higher indemnity expenses.”
Beyond the direct cost increase, delays in the supply chain extend claims-related expenses. Longer repair times mean higher alternative living expenses, extended business interruption, and increased rental car costs. Storage costs also rise.
“Ultimately, whenever the supply chain is disrupted, we see the same pattern: higher indemnity costs and increased secondary expenses,” said Saldanha.
For insurance executives, the challenge is to balance these rising costs with the need to remain competitive. Cutting back too much on coverage or claims payouts could drive customers away, but failing to control expenses could eat into profitability, which is why cost-cutting measures are becoming a top priority.
Trump’s retaliatory trade measures are causing a significant rift in US relations with its top trading partners. While broader tariffs on Canada and Mexico are on hold, businesses and insurance companies alike will have to brace for the worst.
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