AM Best said the U.S. Supreme Court’s ruling against President Donald Trump’s authority to impose sweeping tariffs will help to “ease uncertainty across the insurance industry.”
“Managing through unknowns is a challenge to any industry and most observations and segment analysis in the past year on the insurance industry has included a ‘wait-and-see’ caveat related to the impact of tariffs,” said Sridhar Manyem, AM Best senior director of industry research and analytics, in a statement released shortly after news broke Feb. 20 of the justice’s 6-3 ruling.
Related: US Supreme Court Rejects Trump’s Global Tariffs
“For insurance in particular, the cost of goods sold is not known at the point of sale and how these costs develop is an important factor in the profitability of the industry. Any added uncertainty would challenge how they price the products,” Manyem added.
When Trump proposed tariffs on Canada and Mexico about a year ago, AM Best said they would have a negative effect on the insurance industry.
The tariffs might have negatively affected insurer’s balance sheet strength due to stock and bond market volatility. Tariffs may have also increased inflationary pressures leading to higher loss costs for several lines of insurance.
“For property/casualty insurers, that has created rate adequacy concerns,” Manyem said.
“The trade conflicts and reactions by foreign governments also impacts the global economies and the global insurance industry and have direct impacts on trade credit and indirect impacts on many other lines of business,” said Manyem. “Given the correlation between GDP and insurance market growth overall, this could be a positive sign for the industry.”
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Legislation
AM Best
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