Source: GlobalData
US tariffs likely to threaten Chinese insurers’ profitability, says GlobalData
Posted in Insurance
On April 15, 2025, the US government announced that China would face tariffs of up to 245% on imports to the US as its retaliatory actions. The range of products subject to 245% tariffs includes syringes and needles from China. Additionally, lithium-ion batteries are subject to a 173% tariff, electric vehicles a 148% tariff, car wheels a 73% tariff, and semiconductors a 70% tariff. As a result, Chinese insurers may experience a rise in claim costs across multiple lines of insurance in 2025, which would impact their profitability, says GlobalData, a leading data and analytics company.
Higher tariffs will affect industries such as semiconductors, medical equipment, manufacturing, aviation, automobiles, and insurance. They are expected to slow economic growth and raise inflation and unemployment, impacting life insurance sales. High tariffs will raise business costs and disrupt supply chains, leading to higher premiums for consumers.
Manogna Vangari, Insurance Analyst at GlobalData, comments: “Insurers will experience a detrimental impact on their investment income due to the heightened economic uncertainty and volatility in the financial markets, spurred by escalating trade tensions.”
In response to these external economic pressures, the National Financial Regulatory Administration in China increased the proportion of insurance funds for investment in the stock market. This measure is a component of a wider strategy aimed at infusing institutional capital into equities.
The general insurance loss ratio, which stood at 68.4% in 2024, is expected to increase in 2025–26 and impact the sector’s profitability. Incurred loss is also expected to expand at a compound annual growth rate (CAGR) of 4.8% over 2025–29. Nevertheless, variations in tariff rates could potentially elevate the actual loss beyond this estimate.
According to GlobalData’s Global Insurance Database, China’s general insurance industry is expected to grow at a slower rate of 4.6% in 2025 and 4.4% in 2026 compared to 5.4% in 2024 and register a CAGR of 5.4% over 2025–29, from CNY1.7 trillion ($245.8 billion) in 2025 to CNY2.2 trillion ($306.9 billion) in 2029, in terms of direct written premiums.
Vangari adds: “On April 15, 2025, the US government implemented an export ban on one of its most advanced semiconductor chips, which are used to power artificial intelligence (AI) systems in China. This situation will exert a short-term influence on vehicle production, leading to increased prices for both new and used automobiles. Consequently, this escalation is likely to affect motor insurance premiums and claims.”
Rising port call rates are also leading to higher fees for vessels linked to China, increasing their marine, aviation, and transit (MAT) insurance premiums. The price of Chinese goods is expected to rise as the US works to lessen China’s control over the Panama Canal, raising MAT insurance costs further.
Additionally, on April 16, 2025, the government ordered Chinese carriers to halt deliveries of Boeing Company jets and suspend all purchases of aircraft-related equipment and parts from US companies.
With these orders, the disruptions in the supply chain are expected to result in an increase in claims related to business interruption, marine cargo, trade credit insurance, and political risk insurance. Furthermore, the preventative actions implemented by the Chinese government are anticipated to cause a temporary cessation of exports, which may lead to a reduction in demand for cargo insurance and MAT insurance.
Vangari concludes: “The effects of tariffs on Chinese insurance firms are multifaceted and intertwined with the broader economic consequences of trade disputes. These tariffs may lead to higher claims costs and a deceleration in premium growth. The response from Chinese regulators and insurers indicates a proactive approach to mitigate the negative impacts and maintain financial stability amidst ongoing trade tensions.”