After revelations that the US has slapped several of the world’s largest economies with export tariffs, the insurance market in the UK prepares for increased costs.
This comes as US President Donald Trump revealed his economic attack on the world, including hitting the UK with a 10 per cent tariff and a 20 per cent levy on the European Union.
In a colourful speech late Wednesday night, Trump claimed the tariffs would ensure the US could use “trillions and trillions of dollars to reduce our taxes and pay down our national debt, and it will all happen very quickly”.
The move will be a blow to many UK businesses and sectors, including in the insurance sector.
Alex Bertolotti, head of insurance at PwC UK, said introducing these tariffs “will impact claims costs for insurers”, resulting in pressures “to pass at least some of these costs on to customers”.
The insurance experts went on to highlight the particular risks to global speciality insurance – in which London is the leader, contributing nearly £50bn to the UK economy.
Bertolotti stated that London writes just under 10 per cent of all global speciality risks and provides insurance for complex and high-risk situations that fall outside standard insurance policies, such as cyber threats, oil tankers, airplanes and satellites.
Last month, Lloyd’s of London reported gross written premiums of £55.5bn for 2024, up 6.5 per cent from the £52.1bn recorded for 2023.
However, he pointed out that “tariffs will place pressure on premium rates for these specialist policies, likely driving up insurance costs for global businesses that require them.”
“Any insurance products that rely on parts being repaired or replaced – policies such as marine cargo, marine hull, manufacturing and repair breakdown – will likely be impacted,” he added.
He also pointed out that for business interruption (BI) coverage, the US tariffs may disrupt global supply chains, leading to a loss in business revenue. At the same time, trade credit coverage may see a strain on international buyers, increasing the risk of payment defaults.
While also using political risk insurance as an example, he noted that if tariffs trigger retaliatory trade measures, this could increase the risk of claims being made.
In terms of surety, Insurance giant Howden predicts an increase in the guarantee requirements relating to deferred customs and tariff duty.
Tom Parrott, executive director, Howden, explained: “The implementation of increased tariffs by the Trump administration – as well as the expected retaliatory increases from other countries, the EU in particular – could create a near-term increase in the value of import duty which has the potential to create a capital squeeze on the world’s largest importers.”
He added that that few corporate treasurers would have anticipated this in their 2025-2026 financial planning.
As a result, Parrott said it “may make them reluctant to use available debt and working capital facilities to cover the extra duty payments, particularly as the duration of higher tariffs is unknown.”
However, as Henry Gardener, director of legal and chief risk officer at Markel International pointed out, businesses are already facing increased costs and cash-flow pressures, “insurers play a crucial role in helping businesses”.
He explained that the London specialty market can help “businesses adapt by providing tailored risk management solutions that can support financial resilience in an uncertain economic environment.”
Costs to stack up for drivers
The car insurance market has struggled with increased repair costs and high premiums over the last few years. Last August, a report by the Library of the House of Commons stated that car insurance quotes rose by 82 per cent since May 2021.
Now, the new tariffs cast doubt on the market.
Mohammad Khan, PwC UK head of general insurance, explained that the “UK imports most of the parts we use to repair damaged cars, so an increase in the cost of these parts from the US, China and EU would drive up repair costs, making insurance more expensive.”
He added that “electric cars will be disproportionately affected as we import a greater share of electric parts, which are also typically more expensive.”
Bertolotti pointed out that because “these tariffs have come around with little warning”, the insurance market – especially in the motor industry – “[has] not had time to stockpile goods.”
“[This] would have been one way of delaying the impact on insurance costs,” he stated.
He added: “This means the impact of these tariffs will likely be felt much sooner than, for example, following Brexit, which the industry had more time to plan for.”
Addressing home and commercial property insurance coverage, Khan explained that “Tariffs on imported construction materials like steel and timber could increase the repair or rebuild costs for structures after being impacted by events like fires, storms or floods.”
“This will likely add to home and commercial property insurance costs rising,” he added.
Bertolotti concluded by pointing out that “any weakening of the pound will make the cost of importing car parts and building materials more expensive, adding to the cost of insurance claims.”
Lloyd’s of London declined to comment.
