Businesses across North America face a volatile mix of economic pressure, litigation exposure, and client uncertainty. Tariffs have re-emerged as a powerful disruptor, particularly for clients with global supply chains and reliance on international manufacturing.
For insurance brokers, the challenge is to keep pace with evolving risks while identifying ways to support clients through disruptions.
"From a client standpoint, there's just a lot of unpredictability, both from a macroeconomic standpoint as well as how to best and most effectively manage risk given the current landscape," said Michael Machin (pictured), head of FINEX North America at WTW.
According to Machin, publicly traded institutions have already seen some stock price impacts. He noted a market dip at the start of April, followed by a recovery.
Additionally, clients with more direct exposure to China or other parts of the supply chain have also taken a financial hit, and “their recovery hasn’t matched the broader market rebound,” Machin said.
For smaller and private enterprises, the risks could potentially run deeper. “They don’t carry the same inventory buffers and are more dependent on low acquisition costs from overseas,” Machin said. “If those costs rise two, three, or even four times, you might unfortunately see a more dramatic effect.”
This price shock could erode margins, trigger cost-cutting, or worse, force difficult decisions that reverberate through the workforce and customer base. Brokers are in a critical position to help clients model these scenarios and understand how risk transfer might alleviate the impact.
One of the more complex aspects of this tariff-driven volatility is how it intersects with directors’ and officers' (D&O) liability insurance. Publicly traded firms are being cautious in their disclosures, often opting for transparency over speculation.
Boards and executives are now under pressure not just to act on new tariffs, but to show how they’ve arrived at their decisions. In this environment, Machin said, documentation and governance are becoming as important as the choices themselves.
“No one can predict the future, but companies are trying to be transparent in earnings releases and disclosures, and that’s served them well so far,” Machin told Insurance Business. “Some are exploring reshoring or domestic sourcing, but realistically, that takes time.
"What ultimately, I think, comes back to it is the process from a management and operational standpoint. If a company ultimately does end up in a situation where there's a lawsuit, ensuring that there's clearly been a robust process... that's all most of these companies can do to help manage the risk.”
Despite the pressure, most companies are not rushing to overhaul their insurance programs.
"From our point of view, now is probably not the time to look at wholesale changes to their insurance programs," Machin said.
In the background, the financial lines insurance market, including D&O and cyber, has entered a stable period. Rate deterioration and a surge in capacity in the marketplace have been beneficial to buyers, but rising costs on the litigation front are beginning to reverse those gains.
"While the number [of class actions] has been relatively stable over the last few years, defense costs have increased, putting pressure on insurers’ operating margins. Settlement values have increased fairly significantly over the last few years,” Machin said.
In the face of evolving client risks, innovation in product development is becoming a differentiator for brokers. Clients are demanding more tailored options that reflect the specific threats in their industries, according to Machin, and these solutions are increasingly born out of collaboration between brokers and insurers.
"We’ve made great progress through specialization. In addition to cyber, we’ve developed products for industries like life sciences, healthcare, and construction,” Machin said. “These solutions have unique attributes tailored to their specific risk profiles.”
