Trump tariffs to pressure UK specialty premium rates, motor and home hit hardest

By Rebecca Delaney

April 3 - (The Insurer) - U.S. President Donald Trump's announcement of 10% tariffs on the UK will place pressure on premium rates for global specialty insurance, PwC said.

On Wednesday, the Trump administration set a universal "baseline" tariff of 10% on imports to the U.S., with some trading partners hit by higher levies of more than 50%.

The EU is facing 20% tariffs, with an additional 34% levy on Chinese imports to the U.S. taking the total tariff to 54%.

Alex Bertolotti, head of insurance at PwC UK, warned that specialty insurance products with a reliance on the repair or replacement of parts (including marine cargo, marine hull, manufacturing and repair breakdown policies) are likely to be affected by the move.

"The UK has a thriving market in writing global speciality insurance – writing just under 10% of all global speciality risks and providing insurance for unique, complex, or high-risk situations that fall outside standard insurance policies, such as cyber threats, oil tankers, airplanes and satellites," said Bertolotti.

"Tariffs will place pressure on premium rates for these specialist policies, likely driving up insurance costs for global businesses that require them."

Claims costs for some specialty insurance products are also expected to increase.

This includes business interruption covers, as the new tariffs may disrupt global supply chains, leading to loss of revenue for many businesses.

If the tariffs trigger retaliatory trade measures, PwC said this may increase the risk of claims being made under political risk policies.

Higher tariffs are also likely to place strain on international buyers, increasing the risk of payment defaults under trade credit policies.

Bertolotti added that claims costs are expected to increase in UK motor and home insurance policies, with the cost burden likely to be passed on to consumers – reversing recent reductions seen in personal lines in the UK.

"The UK imports most of the parts we use to repair damaged cars, so an increase in the cost of these parts from the U.S., China and EU would drive up repair costs, making insurance more expensive," said Mohammad Khan, head of general insurance at PwC UK.

He added that electric cars will be disproportionately affected because the UK imports a greater share of electric parts, which are also typically more expensive.

For home and commercial property insurance policies, Khan noted that tariffs on imported construction materials (such as steel and timber) could increase the repair or rebuild costs for structures damaged by events such as fires, storms or floods, leading to rising insurance costs.

"Anything that extends the time taken to undertake a repair increases the expense of an insurance claim, and imposing tariffs typically leads to supply chain pressures as it takes longer to import goods due to the time taken to administer or implement the tariff," Bertolotti concluded.

"As these tariffs have come around with little warning, insurers have not had time to stockpile goods such as car parts, which would have been one way of delaying the impact on insurance costs. This means the impact of these tariffs will likely be felt much sooner than, for example, following Brexit, which the industry had more time to plan for."

KBW analyst Meyer Shields said that personal lines are likely to face the greatest impact from the tariffs, along with commercial auto physical damage, commercial property, marine lines and surety.

In a note on Thursday, KBW said it expects a bigger tariff-related inflationary impact for auto lines than homeowners, owing to the 25% tariff on imported vehicles.

The White House has estimated that imports accounted for about half the 16 million vehicles bought domestically in 2024.

Mexico, Japan, South Korea, Germany and Canada were the five biggest motor vehicle exporters to the U.S. last year.

In contrast, according to the National Association of Home Builders, only 7% of goods used in residential construction are imported (mostly from Canada, Mexico and China).

According to the White House Fact Sheet, automobile parts compliant with the U.S.–Mexico–Canada Agreement will remain tariff-free until the Secretary of Commerce consults with the U.S. Customs and Border Protection to establish a process to apply tariffs to non-U.S. content.

However, the KBW note added that "things still seem manageable".

"We expect insurers to be able to navigate these issues," said Shields.

"Mexico and Canada (which represent significant shares of relevant imports) apparently aren't facing new tariffs, and since it should take time for tariff-related inflationary impacts to manifest, we think insurers have time to file for rate increases, which state regulators are likely to approve."