Navigating Tariff Risks in the Insurance Sector: Strategic Opportunities Amid Geopolitical Uncertainty

The insurance sector in 2025 is operating in a world reshaped by U.S. tariffs and geopolitical fragmentation. While these forces have elevated claims costs, compressed premium growth, and introduced volatility into asset returns, they have also created fertile ground for innovation. Insurers that recalibrate their underwriting focus and adopt resilient asset allocation strategies are not only surviving but positioning themselves to thrive in a fractured global economy. For investors, the key lies in identifying insurers that are leveraging niche markets and capital discipline to turn risk into reward.

Underwriting Niches: Where Tariffs and Geopolitical Risks Create Opportunities

The most compelling opportunities for insurers—and by extension, their investors—lie in underwriting niches that directly address the fallout from trade policy shifts and geopolitical instability.

1. Credit and Surety Insurance: As businesses hedge against payment defaults in a volatile trade environment, demand for credit and surety insurance is surging. Swiss Re projects that these lines could see double-digit growth in 2025, driven by companies seeking protection against non-payment risks in cross-border transactions. Insurers with expertise in assessing counterparty risk and leveraging AI-driven credit modeling are well-positioned to capture this market.

2. Marine and Trade Credit Insurance (Outside the U.S.): While U.S. tariffs have disrupted domestic trade, non-U.S. economic blocs are strengthening internal trade ties, creating new demand for marine and trade credit insurance. Insurers that expand into these regions—particularly in Asia and the EU—are capitalizing on the realignment of global supply chains.

3. Workers' Compensation and Liability Insurance for Tariff-Exposed Industries: Sectors reliant on imported goods, such as automotive and construction, are experiencing higher claims severity due to inflated repair and replacement costs. Insurers offering tailored liability coverage for these industries—especially those integrating predictive analytics to model tariff-driven cost fluctuations—are gaining a competitive edge.

4. Fixed Annuities and Whole Life Insurance: As economic uncertainty drives demand for guaranteed returns, life insurers are seeing a shift toward fixed annuities and whole life products. These offerings provide downside protection in a low-growth environment, making them attractive to risk-averse investors.

Resilient Asset Allocation: Balancing Liquidity and Long-Term Returns

Rising claims costs and inflationary pressures are forcing insurers to rethink their investment strategies. The barbell approach—combining high-quality fixed-income assets with long-term private credit and infrastructure debt—is gaining traction.

• High-Quality Fixed Income: Insurers are increasing allocations to short-duration U.S. Treasuries and investment-grade corporate bonds to preserve liquidity. This is critical for managing sudden spikes in claims costs, particularly in property and casualty (P&C) lines where repair costs for tariff-impacted materials have risen by 5–15%.
• Private Credit and Infrastructure Debt: These assets offer higher yields and diversification benefits in a low-interest-rate environment. Mercer reports that insurers with 15–20% allocations to private credit are outperforming peers by 2–3% annually.
• Dynamic Rebalancing: Advanced analytics and AI-driven tools are enabling insurers to adjust capital deployment in real time. For example, machine learning models now simulate tariff-related scenarios to optimize underwriting reserves and investment allocations.

Leveraging Technology and Strategic Foresight

The insurers best positioned for long-term value creation are those investing in AI and scenario planning. For instance, AI-powered risk modeling allows carriers to adjust pricing dynamically as tariffs shift, while geopolitical risk analytics help identify emerging threats in supply chains. These tools are not just defensive—they are offensive, enabling insurers to design products that address niche risks (e.g., AI liability coverage for generative AI tools).

Investors should also watch for companies adopting embedded insurance models, which integrate coverage into high-risk industries like logistics and manufacturing. This approach reduces customer acquisition costs and aligns insurance products with the evolving needs of tariff-impacted businesses.

Investment Advice: Focus on Adaptability and Resilience

For investors, the insurance sector in 2025 is a case study in balancing risk and reward. Prioritize insurers that:
- Diversify geographically to mitigate U.S. tariff impacts.
- Leverage AI and data analytics to refine underwriting and asset allocation.
- Maintain strong capital buffers to weather claims volatility.

Consider overweighting insurers with exposure to credit and surety lines, as well as those expanding into marine and trade credit insurance in non-U.S. markets. Conversely, be cautious of carriers with heavy exposure to trade-sensitive equities or those failing to modernize their risk modeling.

Conclusion

The 2025 insurance landscape is defined by duality: tariffs and geopolitical risks are both challenges and catalysts for innovation. Insurers that pivot to niche underwriting opportunities and adopt resilient asset strategies are not only mitigating losses but unlocking new value. For investors, the path forward lies in identifying these agile players and backing their ability to navigate—and profit from—a fragmented global economy.