The imposition of new U.S. tariffs on imports from Canada and Mexico, coupled with increased tariffs on Chinese goods, is expected to negatively affect the insurance industry, particularly homeowners’ and auto insurance markets, according to analysts at AM Best.
While the tariffs were initially set for immediate implementation, President Donald Trump delayed the 25% tariffs on many imports from Mexico and some from Canada until April 2, with a one-month reprieve granted to U.S. automakers.
Despite the temporary delay, AM Best maintains that any long-term disruptions to trade will have a negative effect on insurance markets, particularly as rising costs ripple through supply chains and increase claims expenses.
“Given the supply chains that the U.S. auto industry has established with Canada and Mexico, any disruptions and inflationary impacts due to the tariffs will be a credit negative for carriers,” said Sridhar Manyem, senior director at AM Best, in a statement.
Auto insurers are likely to see rising claims costs as tariffs make vehicle parts more expensive and difficult to obtain. Manyem noted that modern vehicles feature advanced engineering and electronics, making them more costly to repair and replace. AM Best said the tariffs’ effect on supply chains will influence loss-cost trends in personal auto insurance, especially given the sector’s strong ties to international trade.
Homeowners’ insurance carriers are also expected to feel the impact, as higher tariffs on imported materials, such as lumber, could drive up home repair and rebuilding costs.
Additionally, tariffs could create broader economic instability, leading to challenges in trade credit and political risk insurance markets. “Tariffs will cause global economic uncertainty as retaliatory and reciprocal measures are implemented,” AM Best stated. This instability could lead to solvency and sales issues, as well as difficulties in fulfilling contractual obligations.
Industry groups have also raised concerns over the impact of the tariffs. The American Property Casualty Insurance Association (APCIA) has warned these measures could hurt businesses and families still recovering from recent natural disasters.
“Tariffs can be effective tools of government if used with precision,” said David A. Sampson, CEO of APCIA, in a statement. “However, these new tariffs are so broad that they are likely to hurt families, individuals and business owners they are meant to protect.”
