As tariff-induced inflationary factors impacting property insurance are expected to affect property reinsurance business globally, Morningstar DBRS analysts have predicted that reinsurers would only experience a mild impact of the factors due to their diverse global operations and exposure to non-property lines like life and casualty reinsurance.
In a new report focused on the recent U.S tariff regime on merchandize trade, the firm’s analysts explained that reinsurance remained a global market, even though the largest market players are primarily domiciled in Europe and Bermuda.
With this in mind, Morningstar DBRS’ researchers noted that most of the tariff-induced inflationary factors that affected property insurance would also impact property reinsurance.
A news report from Reinsurance News, an industry-focused online medium, indicated that given these factors, Morningstar DBRS analysts noted that while U.S. property risks would see the largest impact from tariff-induced inflation, global reinsurers are expected to experience only a mild effect overall.
The researchers hinged their projection on the fact that many of the reinsurers also offered life and health reinsurance, and some had primary insurance lines, such as casualty insurance, that are not closely linked to property reinsurance.
Appraising the wider implications of current U.S. trade policy on the industry, Morningstar DBRS analysts said: “Although insurance companies primarily engage in the provision of financial services, the imposition of tariffs by the U.S. on many goods imports will adversely impact the global insurers’ business and operating environment.
“We expect North American insurers that sell auto and property insurance policies to be the most directly and highly affected because of the ensuing claims cost pressures related to car prices, cost of car repairs, and expenses associated with property rebuilding materials.
“Life and health insurers in the UK and EU are, in our view, relatively less affected under the current tariff environment. Uncertainty around the direction of U.S. trade policy and the likely responses from U.S. trading partners present risks to our assessments”, they added.
Commenting on the firm’s findings, Senior Vice President, Sector Lead Global Insurance & Pension Ratings, Morningstar DBRS, Nadja Dreff, said: “Despite these large trade and market disruptions, we believe that the impact on most well-diversified insurance companies is manageable.
“We expect insurers will take mitigating actions in the form of premium increases, adjustments to supply chains, tighter control of expenses, and potential investment portfolio reallocations”, Dreff added.
