In the wake of President Donald Trump’s recent tariffs, the insurance industry is feeling the heat. Following the announcement of what has been dubbed “Liberation Day” tariffs, the S&P Insurance Select Industry Index dropped over 12%. This decline hit reinsurance and property and casualty (P&C) sectors particularly hard.
As of now, the reinsurance sector has seen a year-to-date fall of 16%, while life insurance has dropped 13.6%. Major players in the P&C market are also struggling. Economic pressures, along with recent natural disasters, have already strained these companies, and the tariffs seem to have pushed them over the edge.
The reinsurance sector alone experienced a 13.4% drop in the days immediately following the tariff announcement. Although there has been a slight recovery, it remains 12.1% below where it was before the tariffs were introduced. Reinsurance broker Gallagher highlighted that hurricanes Milton and Helene, along with wildfires in Los Angeles, have contributed to increased natural catastrophe losses. They also noted a decrease in return on equity for 2024, down to 17% from 19.5% the previous year.
This uncertainty in the market has led to significant stock declines among reinsurers. Reinsurance Group of America faced the steepest decline, with its stock falling 15.9% since the tariffs were announced. This company focuses on life and health insurance products. Another major player, RenaissanceRe Holdings, saw a 10% drop in stock value during the same timeframe.
The P&C sector also took a hit, with a decline of 11.1% in the first five days post-announcement, now sitting at 9.9% below pre-tariff levels. Insurers are worried that the new tariffs will raise the prices of essential goods, such as cars and building materials. This increase could lead to higher claims costs, which would ultimately burden consumers with rising premiums.
Cincinnati Financial Corporation was among the hardest hit, suffering a 14.1% drop in stock price since the tariffs were announced. Mercury General Corporation, which provides auto and homeowners’ insurance, also saw a significant decline of 12.1%.
The life insurance and specialty segments are not faring any better. They fell 15.7% and 12.4%, respectively, in the days following the tariff announcement. Factors like inflation and the rising cost of living are causing more consumers to cancel or not renew their life insurance policies. MetLife, a major player in the life insurance market, experienced a 19.1% decline in stock price over the same period, while specialty insurer Assured Guaranty saw a 12.2% drop.
Overall, the introduction of these tariffs has created a ripple effect across the insurance industry, leading to significant stock declines and raising concerns about future costs for consumers.