President Donald Trump has initiated a bold shift in international trade by employing tariffs as a negotiation tool, which may lead to significant complications for insurers within trade credit, aviation, cargo, and supply chain insurance sectors. GlobalData forecasts that the global marine, aviation, and transit (MAT) insurance market, initially projected to grow at a compound annual growth rate (CAGR) of 6.9%, is now expected to see a decline to 6.4% during 2025-2029 due to these new tariffs.
On April 2, 2025, Trump announced “reciprocal” tariffs on imports, establishing a base rate of 10% and additional tariffs ranging from 10% to 245% on specific goods. Although these tariffs are set to initially pause for 90 days—excluding China—the blanket 10% rate will still adversely affect the global economy, particularly countries heavily reliant on exports to the U.S. Per GlobalData’s findings, the U.S. represented around 50% of global MAT insurance premiums as of 2024. Consequently, high reciprocal tariffs are expected to reduce U.S. MAT insurance premiums by 1.4% in 2025, with global MAT insurance premiums facing a 0.7% decline.
Countries such as Mexico, China, Canada, Germany, and Japan, which collectively account for 53% of U.S. imports, are expected to see a substantial drop in premium growth due to tariffs—0.5pp in Mexico, Canada, and Germany, and 0.6pp in China, with Japan experiencing a 0.2pp decrease. Swarup Kumar Sahoo, a Senior Insurance Analyst at GlobalData, highlighted that the new tariffs would lead to a slowdown in premium growth for MAT insurance, although a temporary increase could occur from April to June 2025, during the tariff pause.
The tariffs will predominantly impact marine cargo industries outside of Canada and Mexico, while both countries will experience disruption in aviation cargo and transit insurance. The growth decline is attributed to decreased exports and the value of goods being shipped. Importers may react to tariffs by consolidating shipments or increasing order sizes, leading to greater theft and damage risks as higher-value goods accumulate in fewer locations. This shift complicates customs processes, raising demurrage and detention fees.
Moreover, insurers will face higher operational costs as they adapt to the new complexities posed by tariffs and will likely encounter increased claims in marine and aviation cargo sectors, ultimately affecting their profitability. Starting May 2, 2025, the U.S. also plans to eliminate exemptions for goods under $800 from China and Hong Kong, prompting DHL and several airlines to suspend high-value shipments, impacting air cargo insurance directly.
In summary, the ramping up of tariffs under Trump’s administration is poised to disrupt the global MAT insurance landscape significantly. With reduced premium growth and increased risks, insurers must remain vigilant against heightened claim frequencies, which threaten their profitability and market share.
Source link
