UK insurers should welcome US trade deal: PwC

By Rebecca Delaney

May 12 - (The Insurer) - The bilateral trade agreement between the UK and the U.S. should be "welcomed" by UK insurers due to the reduced secondary impacts on supply chains and claims costs, said PwC UK's Alex Bertolotti.

On Thursday, President Donald Trump and Prime Minister Keir Starmer announced a limited trade agreement that keeps Trump's 10% tariffs on British exports, but lowers U.S. duties on British car exports.

"While they were not expecting a direct impact, insurance companies will welcome the reduced secondary impact on their supply chains which should reduce costs which they can pass on to customers through reduced premiums," said Bertolotti, insurance leader at PwC UK.

He added that one of the deal's most significant impacts for UK insurers is the reduction in uncertainty and the increase in economic stability.

On the same day, the Bank of England reduced interest rates from 4.5% to 4.25% – the lowest level since May 2023.

"Over the years, higher interest rates have provided insurers with stable investment returns and a welcome return to profitable investment income. As interest rates gradually fall, insurers may look to adjust their pricing strategies," said Bertolotti.

He continued that even if this leads to a knock-on impact on insurance premiums, there will likely be variances in approach as some insurers may opt not to increase premiums to maintain or grow their market share.

"Insurers will be looking at the double whammy announcement of a trade agreement and falling interest rates closely," Bertolotti concluded.

"This should reduce credit spreads on UK life insurers which should bring more certainty to life insurers – and the regulator will be looking for companies to be as clear and transparent as possible with customers about what the impact will be."