Reinsurers to weather tariff-induced market volatility with minimal impact: S&P

Global reinsurers will experience only a minor impact from declines in global equity markets triggered by tariffs and counter-tariffs imposed by the U.S. and other nations, thanks to their conservative investment strategies, says S&P.

Last week, President Trump introduced a broad tariff plan that aimed to reshape global trade dynamics and longstanding economic relationships with U.S. allies. However, his administration has since postponed higher tariffs on most countries for 90 days, while moving forward with trade measures specifically targeting China.

According to S&P, the U.S. tariffs sparked “capital market routs” across the world, leading to increased volatility in the investment portfolios of global reinsurers.

As noted, although the conservative investment strategies of global reinsurers should mitigate significant impacts, the rating agency warns that the sector will still face short-term exposure to equity market losses, potential asset impairments in the medium term, and long-term challenges related to illiquid holdings such as real estate, private debt, and equity.

“Current equity market volatility follows an already bumpy start to the year, with the January 2025 California wildfires resulting in estimated industry insured losses of up to $50 billion. Reinsurers are expected to absorb a substantial portion of these costs within their annual earnings, reducing the catastrophe budget available for the remainder of the year,” S&P added.

Still, the industry has shown significant improvements in operating performance in recent years. Despite facing substantial insured natural catastrophe losses globally, reinsurers achieved robust earnings growth in 2023 and 2024, exceeding their cost of capital.

S&P Global Ratings credit analyst Taoufik Gharib added, “The reinsurance sector entered 2025 with a robust capital position, bolstered by excellent underwriting performance in short-tail lines, solid net investment income, and recovering fixed-income asset values over the past two years.

“In turn, we think global reinsurers are well positioned to manage the elevated natural catastrophe losses seen in first-quarter 2025, alongside the recent financial market volatility, and so maintain our stable view of the sector.”

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