Ongoing trade frictions triggered by U.S. policy are expected to dampen global insurance premium growth in 2025, according to the latest sigma report from the Swiss Re Institute.

Swiss Re forecasts that global gross domestic product (GDP) growth will slow in 2025 and 2026 compared to last year, primarily due to the sweeping trade war initiated by the U.S. administration. Given that the U.S. accounts for nearly 45 per cent of global insurance premium volume, this climate of uncertainty is expected to have a significant impact on insurers’ business growth prospects.

The report, released July 9, projects global GDP to decelerate from 2.8 per cent in 2024 to 2.3 per cent in 2025, and further down to 2.4 per cent in 2026.

This economic cooling is expected to weigh on insurance premium growth. After a strong 5.2 per cent increase in 2024, premium growth is projected to slow sharply to 2 per cent in 2025, before edging up slightly to 2.3 per cent in 2026. Notably, Swiss Re’s economists had underestimated last year’s global insurance market performance, having forecasted only 3.2 per cent growth for 2024.

Consumers are curbing spending and businesses are scaling back investments amid the uncertainty caused by heightened trade barriers. However, Swiss Re notes that this slowdown has yet to be reflected in the most recent economic data.

“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,” says Jérôme Haegeli, Swiss Re’s Group Chief Economist. “In the long term, U.S. tariff policy is another move towards more market fragmentation, which would reduce the affordability and availability of insurance, and so diminish global risk resilience.”

Major markets under pressure

The traditionally “safe haven” status of U.S. financial markets is being tested by the volatility of trade policy under the current administration, in office since January 2025. This shift has prompted the Swiss Re Institute to lower its growth expectations for major economies in the short term.

U.S. GDP is expected to grow by only 1.5 per cent in 2025, compared to 2.8 per cent in 2024. Swiss Re warns that Washington’s trade barriers will disrupt supply chains and push U.S. inflation higher.

“U.S. consumers will be hit hardest by U.S. tariff policy and cut their spending as a consequence of higher prices. This is turn will weigh on U.S. growth, which mostly depends on household consumption,” Haegeli adds.

While U.S. economic conditions are expected to stabilize in 2026, the report cautions that over the medium to long term, “the reduced flow of goods, services, capital and people is expected to pose a structural headwind to potential growth.”

Swiss Re also highlights the fiscal cost of current U.S. policies. The administration’s budget plan is expected to add US$4.1 trillion to the national debt over the next decade, with annual interest payments increasing from US$900 billion in 2024 to US$1.9 trillion by 2034.

Impacts on supply chains and insurance markets

Swiss Re warns that growing economic and market fragmentation could generate significant risks and costs for the insurance industry. Trade barriers, supply chain disruptions, and the reshoring of production may contribute to prolonged inflation, thereby driving up claims costs.

In the property and casualty (P&C) sector, rising competition in personal lines and the end of the hard market in commercial insurance are expected to limit premium growth to 2.6 per cent in 2025, down from 4.7 per cent in 2024.

Still, Swiss Re notes a potential upside. “Tariffs and uncertainty may create some opportunities for insurers. A heightened awareness of risk typically benefits insurers, provided that the economic shock is not severe. This is particularly the case for lines of business offering protection against economic and financial disruptions, such as credit and surety insurance,” the report says.

Marine insurance outside the U.S. could benefit from supply chain realignment if other economic blocs increase trade among themselves. “Insurance demand could be boosted by growth from fiscal stimulus, for example in China or the European Union, as well as potentially looser monetary policies,” the report adds.

Life insurance trends

In the life insurance sector, premium growth is expected to drop significantly from 6.1 per cent in 2024 to just 1 per cent in 2025, before rebounding to 2.4 per cent in 2026. Despite the slowdown, profitability prospects remain solid thanks to strong investment results.

Looking further ahead, the Institute projects average global life premium growth of 2.5 per cent annually between 2026 and 2035 — 100 basis points higher than the 1.5 per cent average seen from 2015 to 2024.

Life insurers in the U.S. and Canada are expected to continue benefiting from elevated reinvestment yields. However, Swiss Re cautions that rising default rates pose a downside risk for carriers heavily exposed to private credit. “Market volatility, annuity spread compression and elevated surrender activity may offset gains, potentially dampening operating income growth,” the report concludes.