By Claire Simpson and Sam Wilkin | June 23, 2025
U.S. President Donald Trump was widely expected to make major changes to U.S. policy on tariffs, immigration, and taxation. It was less clear how he would handle outgoing Biden administration priorities including antitrust, clean energy (the Inflation Reduction Act, which was seen to benefit Republican-voting states), and technology (the CHIPS Act, which was seen to support reshoring of strategic sectors, a Republican priority).
As of this writing, Trump’s tariffs policy has dominated attention, especially in financial markets (although exemptions and pauses have eased the initial shocks). Despite replacing Biden-era personnel at the Department of Justice, Trump’s approach to antitrust has been a surprising point of continuity. While Trump has repeatedly criticized the CHIPS Act, he has not (yet) repealed it.
When it comes to credit insurance markets, though, it is the new administration’s policies on clean energy that have proved most disruptive, triggering striking changes in pricing and underwriting behaviour.
Our initial market readings at the time of 'Liberation Day' pointed to insurers largely taking a wait and see approach on the depth and duration of the tariff impacts, though they did flag automotive and renewables as sectors that were going on to a watchlist together with increased underwriting scrutiny on emerging market deals more broadly.
Client enquiries have pulled back in Q2 thus far, after a modest uptick in Q1. Looking at high level across all enquiries, insurer interest has remained relatively consistent throughout in terms of the quote ratio. Q2 is however showing a slight upswing in terms of pricing, which bucks the year-on-year downwards pricing trajectory and is something that we will be watching closely.
Looking below the high level, we can see that certain sectors are seeing bigger swings in terms of new business activity. Client interest in U.S, transactions surged in Q1, with a particular emphasis on U.S.-based project finance transactions, with enquiries up 100% on the average flow for 2024. This growth in client interest came presumably as a direct response to the uncertainty surrounding the U.S. governmental agenda on projects, particularly those in the renewables space. Client demand for project finance deals has since shrunk in Q2, suggesting that clients have moved to taking an equally cautious approach to project risk.
This pattern of a deal heavy Q1 and a significant slowdown in Q2 is echoed by the Credit Risk Solutions Lender's Insurance Advisory team. Year-on-year the volume is the same but a sharp contraction in Q2 (-30%) now points to a potential slowdown for 2025 overall. Interestingly and in contrast to the broking business, the team is seeing less of a slowdown in the renewables space as projects continue to go ahead supporting carbon emission reduction targets.
Insurers met the Q1 surge in client interest in U.S. project finance deals with understandable caution. There is clear evidence of a marked pull back in terms of their quote ratio on U.S. projects in comparison to the 2024 average (-86.7%). Interestingly where quotes proceeded to bind in Q1 there was a sudden spike in pricing (+592%) though this has since normalised in Q2 and suggests that perceived increases in risk are now being addressed in terms of underwriting discipline rather than price movements.
The other sector flagged by insurers as particularly challenging in the tariff environment was automotive – the largest in scale of the Trump administration’s new sector tariffs. In similar fashion to project finance risks, Q1 saw a jump in terms of client interest, tempered in Q2. Insurer interest has however moved in the other direction with an improvement in the quote ratio in Q2 – more positive news than we had expected, though we have had no transactions close in either quarter, which again suggests clients are being more conservative in the sector.
Emerging and developing market interest remained subdued during Q1 and Q2, both from a client perspective and on the insurer side. There were a couple of notable exceptions in South Africa and Uzbekistan, where Q1 saw a marked jump in client interest but, as with other areas, this demand fell right back to below the 2024 average in Q2. Pricing has, however, remained constant, which indicates insurers are not penalising clients for market volatility in these territories. This is interesting given many emerging markets are so critical to global supply chains and bore some of the more extreme tariffs announced (although then paused) on 'Liberation Day.'
Looking forward, fragile emerging markets are the most obvious concern. The administration appears to wish to reorient U.S. foreign policy to focus on a key set of close allies. To that end, significant cuts in U.S. foreign aid have been made. The U.S. treasury secretary has commented that 18 major economies would be the focus of trade deals; Trump has said the rest of the world will receive letters “telling people what they’ll pay” in tariffs. This combination of reduced foreign aid and potentially high tariffs could trigger economic shocks. Countries potentially facing tariffs of more than 30% include Bangladesh, Cambodia, Lesotho, Madagascar, Mauritius, and Myanmar, although the administration has hinted that these country-by-country rates may be scrapped in favour of regional rates.
Another concern – which could be rapidly overtaken by events – relates to the EU (and to a lesser extent other major economies). The U.S. administration achieved its main tariff goals with the deal framework announced with the U.K. That framework kept the 10% global tariff in place, along with sector tariffs (with some rebates). Meanwhile, the U.K. appeared to have agreed to limit the presence of Chinese firms in steel and pharmaceutical sourcing, while not retaliating against the U.S. tariffs.
It would be surprising if the EU or Canada agree to all four of these conditions. Success with Japan, South Korea and Mexico seems more likely but not guaranteed. While ‘deals’ that include some foreign retaliation are perhaps the most plausible scenario, an unexpected breakdown of talks with one or more major U.S. trading partners, and resumption of 'Liberation Day' trade hostilities, is not outside the realm of possibility, and could lead to a significant reaction in credit insurance markets. Finally, other sector tariffs are on the horizon – specifically, copper, wood and wood products, pharmaceuticals and ingredients, semiconductors, rare earths and critical minerals, and trucks. We would expect that market reactions, if any, would have occurred, as these investigations have been well-advertised. However, higher-than-expected rates (such as the recent doubling of steel tariffs to 50%) could trigger a response.
Contact our team for more data-driven insights into current credit insurance market trends.
WTW hopes you found the general information provided here informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
