Property & Casualty Insights
Tariffs and Casualty Insurance: Navigating the Ripple Effects
JULY 28, 2025
As global trade tensions persist into mid-2025, tariffs continue to reshape supply chains, pricing structures, and operational risk across industries. These developments are not only affecting the costs and availability of goods but are also introducing new challenges for casualty insurance and risk management. By proactively adjusting risk financing, refining exposure assessments, and tightening claims management, organizations can better navigate this evolving terrain.
Auto Liability and Physical Damage
Tariffs have disrupted the availability and costs of automotive replacement parts, driving up repair expenses and delaying claims resolution. These delays not only increase claims costs and accruals but also contribute to rising insurance premiums. The anticipated surge in expedited shipping over the next 90 days — driven by supply chain bottlenecks — may further strain logistics, increasing driving hours and accident frequency.
Risk Management Strategies:
- Reevaluate risk financing structures, including higher deductibles or self-insurance for auto physical damage (APD).
- Conduct reviews of exposure bases and safety protocols.
- Scrutinize lease and financing agreements for risk implications.
- Launch detailed claims reviews and closure initiatives.
- Leverage the USI PATH® framework for structured mitigation.
General, Products, and Umbrella Liability
Tariffs are prompting contract revisions that shift liability between parties. Simultaneously, supply chain compromises may lead to diminished product quality. These factors, combined with rising material costs and reduced sales orders, are inflating claims and accruals.
Risk Management Strategies:
- Conduct thorough reviews of contractual language and classification.
- Align premium exposure bases with actual risk.
- Explore alternative risk financing options.
- Reassess policy limits and per-location/project aggregates.
- Implement claims reviews and policy alignment reviews.
Workers’ Compensation
Tariff-induced economic pressures are leading to job eliminations, workforce shortages, and operational changes — all of which can elevate workers’ compensation risks. Increased claims costs and potential fraud further complicate the landscape.
Risk Management Strategies:
- Ensure claims are thoroughly investigated to confirm they are work-related.
- Analyze classification codes, payroll, and experience modification (e-mod) factors.
- Explore alternative risk financing options.
- Conduct detailed claims reviews focused on timely claim closure.
- Apply the USI PATH® methodology to streamline response.
How USI Can Help
At USI, we understand that navigating the complexities of tariffs and their cascading effects on casualty insurance requires more than just awareness — it demands action. Our integrated solutions are designed to help organizations respond with agility and confidence.
USI PATH®: A Strategic Framework for Risk Mitigation
Our proprietary USI PATH® framework enables clients to proactively manage risk by aligning insurance strategies with operational realities. Whether you're facing increased auto liability due to shipping challenges or contractual shifts in general liability, PATH helps identify the most effective mitigation strategies.
Risk Financing Expertise
We work with clients to evaluate and implement alternative risk financing strategies, including higher deductibles, self-insurance options, and quota share arrangements for umbrella coverage. These approaches can help offset rising premiums and claims costs driven by tariff-related disruptions.
Contract and Coverage Alignment
Our specialists conduct detailed reviews of contracts and policy terms to verify that your coverage accurately reflects your contractual obligations. We help you adjust to shifting liability landscapes and avoid gaps that could lead to costly claims.
Class Code and Exposure Base Review
A review of insurance classification codes and exposure bases can make a significant impact on the bottom line. With code reclassifications, USI has helped clients reduce premiums by up to 30% for workers’ compensation, general liability, and auto insurance. We have also helped clients avoid costly exclusions, improve audit outcomes, identify exposure base inaccuracies, and grow their businesses.
Claims Analytics and Claim Reviews
USI’s claims consulting team uses data-driven insights to identify trends, mitigate claims costs, and improve closure rates. This is especially critical in environments where tariffs are inflating repair costs and delaying resolutions.
Workforce and Safety Strategy Support
From e-mod analysis to classification code reviews, our workers’ compensation consultants help you adapt to workforce changes and operational shifts. We also assist in developing fraud prevention strategies and enhancing safety protocols.
Insights and Resources
Stay informed with future insights on the impacts of tariffs and our recent article, Tariffs: What You Need to Know Now, which explores the broader implications of tariffs on property insurance and enterprise risk.
For more information, contact your USI representative or email pcinquiries@usi.com.
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