US tariffs set to slow global economy and insurance premium growth: Swiss Re Institute

US tariff policy reduces trade and heightens uncertainty, decelerating both economic and insurance premium growth around the world, a recent Swiss Re report has revealed.

While current economic data may not yet fully reflect it, consumers and firms have likely already begun to reduce spending and investments due to existing uncertainty, analysts state.

Swiss Re Institute’s World Insurance sigma projects a slowdown in global GDP growth (inflation-adjusted) to 2.3% in 2025 and 2.4% in 2026, down from 2.8% in 2024.

The global insurance industry is anticipated to follow this trend, with total premium growth expected to decelerate to 2% this year from 5.2% in 2024, before recovering slightly to 2.3% in 2026.

Jérôme Haegeli, Swiss Re’s Group Chief Economist, said: “While insurers’ profitability outlook is still benefiting from rising investment income, we expect tariffs to slow global GDP growth, and consequently weigh on insurance demand. In the long term, US tariff policy is another move towards more market fragmentation, which would reduce the affordability and availability of insurance, and so diminish global risk resilience.”

The unpredictable shifts in US policy under the current administration have diminished confidence in the US government, leading to the deterioration of its “safe haven” status for global capital.

This, combined with the stagflationary shock of tariffs, has led Swiss Re Institute to lower 2025 growth expectations for most major economies.

US GDP growth is forecasted to slow down this year, going from 2.8% in 2024 to 1.5%. As global supply chains become less efficient and domestic US industries more protected from international competition, US inflation will likely move structurally higher on average.

Jérôme Haegeli, Swiss Re’s Group Chief Economist, says: “US consumers will be hit hardest by US’ tariff policy and cut their spending as a consequence of higher prices. This in turn will weigh on US growth which mostly depends on household consumption.”

The Swiss Re Institute predicts a rebound in 2026, with growth rising to 1.8%. This follows a “tariff shock” in 2025, as the US economy adapts to persistently higher tariff rates, bolstered by a more stable labour market.

Over the medium to long term, however, the reduced flow of goods, services, capital and people is expected to pose a structural headwind to potential growth.

In Europe, policy uncertainty will limit growth to 0.8% this year, with US-EU trade talks posing the main risk, according to the report.

However, in 2026, weaker 2025 growth could give way to a brighter picture in 2026, with German fiscal expansion and ECB rate cuts potentially boosting euro area growth to 1.3%. Meanwhile, China’s GDP growth is projected to slow to 4.7% in 2025, from 5.0% in 2024, due to tariffs and ongoing uncertainty.

“The risks and costs of the accelerating fragmentation of economies and markets may be serious for insurance. Trade barriers and supply chain disruption or reshoring may push up inflation for prolonged periods, feeding into higher claims costs. Restrictions on cross-border capital flows for re/insurers can lead to inefficient capital allocation and higher capital costs, ultimately leading to higher insurance prices and possibly curtailing the insurability of peak risks,” the report stated.

Growth in the global insurance industry, for both life and non-life sectors, is slowing after a strong 2024. The Swiss Re Institute forecasts 2% year-on-year total premium growth in 2025 and 2.3% in 2026, about half the growth rate of 2024.

Non-life insurance premium growth has gone down to 2.6% this year, from 4.7% in 2024, mainly due to increased competition in personal lines and softening market conditions across commercial lines.

For life insurance, growth is predicted to slow down significantly to 1% as interest rates moderate after 6.1% growth in 2024. Growth is expected to improve to 2.4% in 2026, with insurers’ profitability outlook remaining positive due to continuing gains in investment income.

Tariffs are expected to have a greater impact on the insurance industry in the US, though these effects should be manageable, according to the report.

Outside of the US, the impact is anticipated to be relatively limited, with the specific effects of tariffs on the insurance industry being varied across different geographies.

According to the report, the US motor physical damage will be the most tariff-impacted insurance sector. “US tariffs are expected to increase prices for auto parts used for repairs, as well as new and used car prices for vehicle replacement,” the report explains.

Adding: “However, claims severity increases should be modest compared with the post-COVID-19 inflationary impact. US motor repair and replacement costs are expected to grow by 3.8% in 2025. Nevertheless, this is still lower than the annual increase in 2021 (14%) and 2022 (13%).”

On a positive note, tariffs and uncertainty could benefit insurers by raising risk awareness, especially for credit and surety insurance, which protect against economic disruption, analysts noted.

For example, Marine insurance could see growth if trade shifts. And fiscal stimulus, in China or EU, and looser monetary policies may further boost insurance demand, the report concluded.

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