Setting aside the populist flavor of his campaign rhetoric, Donald J. Trump’s previous service as the nation’s 45th President presents a remarkable opportunity to make educated guesses about the impact of his expected policies on the property/casualty insurance industry as the 47th President.

Towards this aim, we asked a diverse group of industry observers to provide their thoughts on a plethora of probable policies directly or indirectly affecting insurance carriers, as Trump, a Republican Congress, a conservative Supreme Court, and an eclectic group of Cabinet picks take charge on January 20, 2025.

The experts weighed in on plans by the President-elect and his conservative acolytes to increase tariffs, deport illegal immigrants, lower corporate taxes, roll back environmental regulations, and decrease automobile insurance premiums. They offered opinions on the fiscal sustainability goals of the advisory Department of Government Efficiency (DOGE), specifically whether FEMA, NOAA, USGS and the NFIP—agencies whose remits affect the risks of property and flood insurers—will be downsized as planned. Other comments focused on corporate tax cuts and tort reform.

Predicting the future is a fool’s errand, unless that future involves Trump, whose victory nobody, Republicans included, imagined four years ago. “There are Republicans and Democrats, and then there’s Trump, who doesn’t fit into a particular mode,” said Scott Seaman, co-chair of the global insurance services practice group nationwide law firm Hinshaw & Culbertson. “He has reshaped the Republican party in his image and comes [into office] with majorities in the Senate and the House, which will likely facilitate the confirmation of his cabinet appointees and plans.”

Low Taxes, Higher Tariffs

One of these plans is an extension of Trump’s 2017 tax cuts, set to expire at the end of 2025. The continuation of lower corporate taxes is good news for insurance carriers, the interviewees concurred. “To the extent Trump is successful in continuing the tax reductions and in slowing economic inflation, insurers will be able to reduce operational costs and claims costs, respectively,” Seaman said.

Others agreed. “The extension of the Tax and Job Cuts legislation during Trump 1.0 benefits every business, including insurers,” said economist Robert Hartwig, a clinical associate professor of finance and insurance at the University of South Carolina, and head of the university’s Risk and Uncertainty Management Center.

Echoing these comments is Jerry Theodorou, director of the finance, insurance and trade program at R Street Institute, a U.S.-based center-right think tank. “If reintroduced as Trump plans with a lower corporate tax rate that is likely to pass because of the Republican majorities, it will go to the bottom lines of insurance companies and that’s good.”

What’s not good is the President-elect’s campaign pledge to deport millions of undocumented immigrants starting on his first day in office. Hartwig projected that the plan will blow up for industry sectors dependent on immigrant labor like construction, agriculture, hospitality, manufacturing and mining, with the repercussions felt in the insurance sector.

“I can’t tell you what proportion of the labor force in these industries represents undocumented immigrants, but it is certainly significant,” he said. “In my neighborhood in South Carolina devastated by Hurricane Helene, the language of many workers repairing roofs and removing debris is Spanish. Assuming they’re deported, the next time disaster strikes it will take longer and be costlier to repair homes and businesses, trickling down to affect property insurers and the prices they charge.”

“Vertical industries that rely on immigrants like construction may be hit hard if you pull out those workers. If that happens, it can create financial distress for companies in these sectors, driving up D&O claims frequency.”

Dan Bailey, Bailey Cavalieri

Veteran directors and officer liability (D&O) attorney Dan Bailey at law firm Bailey Cavalieri perceived a link between mass deportations and rising D&O claims. “Vertical industries that rely on immigrants like construction may be hit hard if you pull out those workers. If that happens, it can create financial distress for companies in these sectors, driving up D&O claims frequency,” he explained.

Moving on to the President-elect’s intention to impose an additional 10 percent tariff on China and additional 25 percent tariffs on Mexico and Canada, the industry experts forecast problems ahead for insurers. “In the short run, tariffs hurt workers and push prices up; they’re inflationary,” said Michel Leonard, Chief Economist at the New York-based Insurance Information Institute. “If domestic producers lose their foreign buyers or partners after the tariffs go away, the long-term impact may be destructive.”

Automakers are a case in point. Higher tariffs will drive up the cost of car components and materials, resulting in more expensive repairs that are passed on to insurers and ultimately the policyholder.

“Automobile parts imported from Mexico account for 38 percent of such parts sold in this country, whereas automobile parts from China sold here have fluctuated between 10 percent and 25 percent,” said Theodorou. “Trump contends that U.S. companies will simply retool and make these parts domestically, offsetting the inflationary impact. It will take years for that to happen.”

Hartwig agreed, noting that the U.S. auto repair industry is highly dependent on imported automobile parts to contain the cost of car repairs. “By threatening tariffs that would include automobile parts and presumably automobiles, it will drive up the cost of vehicle repairs, producing an instantaneous adverse impact on automobile claims severity, both commercial and personal lines. The last thing drivers need is to be hit with automobile insurance rate increases due to the imposition of massive tariffs,” he said.

If higher tariffs are imposed as expected, Theodorou said it will reverse positive trends in private passenger automobile insurance premiums, which have fallen through the third quarter of this year by 11 percentage points, he said. “Just when things were getting better, the higher cost of car repairs will drive rates higher. When repair costs go up, insurer loss costs go up, driving up insurance premiums.”

This adverse impact apparently controverts Trump’s campaign promise to lower automobile insurance premiums by 50 percent for all Americans. “That’s complete fiction, since insurance is a state-regulated industry outside the President-elect’s influence,” Hartwig said.

The same sequence of events—higher tariffs produce higher costs requiring higher insurance premiums—is in play in the construction sector. “Canada is the country’s largest supplier of forest products like softwood lumber used to build houses,” said Hartwig. “Higher lumber costs mean more expensive building repairs that are bound to increase commercial and residential property insurance rates.”

Insurance rate hikes can be expected in the agricultural sector, too, said Leonard. “The last time this administration was in office, tariffs on beef and cattle significantly impacted farm owners insurance, pushing down premium volume for insuring machinery and equipment as farmers delayed replacing or expanding their machinery for years,” he said, adding that other insurance lines like trade credit, marine and cargo may be similarly affected.

Bailey also commented on tariffs from his unique perspective as a D&O attorney. “If the size of the tariffs is as big as what is being purported, the companies most affected will experience economic strife, which is always an incubator for D&O claims,” he said.

DOGE Cutbacks

The President-elect’s handoff to DOGE’s co-chairs Elon Musk and Vivek Ramaswamy to slash government spending by $2 trillion is reportedly influenced by Project 2025, a conservative blueprint for government drawn up by the Heritage Foundation that Trump disavowed during his campaign. Among the agencies in the crosshairs are FEMA (Federal Emergency Management Agency) and NOAA (National Oceanic and Atmospheric Administration).

Trump 2.0 and EVs??

The President-elect’s tough stance on electric vehicles (EVs)—he pledged during his campaign to curtail government tax credits and other federal support for EVs—may have moderated. The reason is his closer connection to Tesla founder Musk, who reportedly gave $277 million to the Trump campaign.

“As Musk looks to reduce government spending, will it possibly include his own company’s EV subsidies? That’s a huge question,” said University of South Carolina Professor Robert Hartwig. “EVs are more expensive to insure than traditional gas-powered vehicles, so the expected top line growth [of automobile insurers] could be impacted. Nevertheless, the net effect of slower EV adoption rates is likely to be minimal.”

Hartwig said he is mystified by the objections to NOAA, other than an interest in slashing costs across the board. “NOAA’s analyses on hurricanes and other storms provide extremely valuable services to the public, state and local governments, property insurers and emergency response organizations of every sort, including the government itself,” he explained. “The notion that we as a nation will be better served by no longer funding catastrophic hurricane, tornado and hail forecasts is greatly mistaken.”

NOAA’s historical weather observation data and information on hazard frequency and severity relationships is critically important to the reinsurance industry, said Mark Bove, meteorologist and senior vice president of natural catastrophe solutions at Munich Re. Bove cited the information’s use in creating catastrophe risk models and parametric triggers for catastrophe bonds. “NOAA’s real time data, analyses and forecasts of natural hazards also help insurers plan for post-event response [to a disaster],” he added, commenting that the agency “provides one of the best returns on investment of American taxpayer dollars in the country.”

Regarding FEMA, which resides inside the Department of Homeland Security and is likely to be led by Gov. Kristi Noem, Hartwig said he is unsure what her approach will be. “It won’t be abolished. That’s a certainty. And [if] its budget is downsized considerably, and a major hurricane strikes in 2025 or 2026, the federal government’s poor response will be a black eye on the Trump Administration. Bungled federal responses are a breeding ground for discontent and can contribute to additional litigation against insurers.”

Assuming a “past is prologue” repeat, the budget of the USGS (United States Geological Survey) will contract. President Trump’s fiscal year 2018 budget resulted in a 15 percent funding cut for USGS and in subsequent years, he took aim at reducing the budget further. Additional spending decreases will be problematical for some insurers. As Bove pointed out, “USGS provides updated data every six years on U.S. seismic hazards that are then incorporated into earthquake catastrophe models.”

“NOAA’s real time data, analyses and forecasts of natural hazards…help insurers plan for post-event response. [NOAA] provides one of the best returns on investment of American taxpayer dollars in the country.”

Mark Bove, Munich Re

Project 2025 also calls for privatizing FEMA’s National Flood Insurance Program (NFIP), a federal agency drowning in debt that continually seeks Congressional subsidies. “With all its problems, the NFIP is a relatively complex program with layers of reinsurance that has recently improved with the implementation of a new flood risk rating methodology,” said Theodorou.

The new risk methodology, called Risk Rating 2.0, considers a broader range of flood risk data, including pluvial risks, intense bursts of rainfall that cause flooding in cities and other urban environments, and a building’s replacement costs. “Why kill it now and what will replace it?” said Theodorou. “The insurance market isn’t going to replace it.”

The Big Regulators

Like elsewhere across the federal government, DOGE is eying significant reductions in personnel and offices at the Federal Trade Commission (FTC) and the Securities and Exchange Commission (SEC). But the bigger story is anticipated pullbacks in the agencies’ regulatory and enforcement initiatives.

“If what the press is saying is true that the FTC under Trump will be more laissez-faire and not interfere as frequently in mergers and acquisitions and antitrust issues, then that creates D&O implications for board directors, putting them in the hot seat more often as shareholders challenge a proposed or completed merger or acquisition,” said Bailey. “The bigger the merger, the hotter the seat.”

Alternatively, a withdrawal in the SEC’s regulatory and enforcement objectives will benefit directors and officers. “They’re the main regulator we worry about from a D&O standpoint,” said Bailey. “Under Biden, enforcement actions [against directors and officers] were very aggressive. The SEC bent over backwards to chase what they called the ‘gatekeepers of a corporation.’ If Trump does what he is signaling he’ll do, we’ll see less aggressive actions and fewer enforcement proceedings, good news for D&O insurers.”

In agreement with this perspective is Seaman from Hinshaw & Culbertson. “The general expectation is that D&O exposures related to compliance and enforcement risks by government agency actions will decrease, which is healthy in terms of reducing D&O exposures,” he said.

Seaman also commented on the benefits to D&O insurers arising from the June 2024 ruling by the U.S. Supreme Court that ended the “Chevron deference,” a 40-year-old legal doctrine requiring federal courts to defer to federal agencies’ interpretations of ambiguous statutes. “Federal judges will now determine the meaning of these laws,” he explained. “To the extent there are exposures caused by regulations, they will moderate in the next administration.”

Many of the Biden Administration’s environmental regulations to reduce greenhouse gas emissions are likely to be gutted, chief among them is the SEC’s carbon emission standard. The controversial rule requires public companies to disclose direct emissions from operations and indirect emissions from purchased energy in their financial filings. Stalled by lawsuits, the standard is likely to be vanquished in Trump 2.0. The challenge for D&O insurers is if states intervene with their own emissions requirements.

“We’ve already seen California enact two different statutes in 2023 requiring climate change disclosures for companies that do business in that state,” said Bailey. “If other states follow, and five or six are reportedly considering this, a patchwork quilt of different emissions regulations will arise. Whenever that occurs, it adds dangerous complexities to the obligations of directors and officers and complicates their potential liability.”

Bits and Pieces

One government entity likely to survive the DOGE scalpel is the Federal Insurance Office (FIO), if for no other reason its meager size. “FIO has 13 full-time employees and Homeland Security has 260,000,” said Theodorou. “If Ramaswamy and Musk are trying to cut fat out of the government, it would be laughable if they went after an agency with a dozen people [that’s] been described as toothless because it monitors the industry and doesn’t regulate it.”

Hartwig said he would not be surprised if the FIO is dissolved, explaining that it was created as part of the Dodd-Frank Act during the financial crisis in 2010, when the then-giant insurer AIG became the largest government bailout recipient. “In the 14 years since, it has become abundantly clear that insurers do not pose a systemic risk to the economy. Even the NAIC [National Association of Insurance Commissioners] may wind up supporting its dissolution,” he said.

“Why kill it now and what will replace it?” said Theodorou, referring to NFIP. “The insurance market isn’t going to replace it.”

Leonard has higher hopes for the FIO, commenting that the next administration offers an opportunity for the government “to refocus, or better focus, the FIO’s scope on collaboration, rather than attempting to create a new layer of regulatory oversight.”

One thing the next administration is not likely to do is establish a federal reinsurance mechanism for property insurers, an idea floated by the Consumer Federation of America. The federal reinsurance facility would replace or augment the insurance capacity provided by traditional reinsurers to absorb carriers’ natural disaster risks. Asked for his opinion on the idea, Hartwig said, “Creating some sort of federal reinsurance system will be the first step in turning private property insurance markets in the United States into the next unfunded entitlement program.”

Another question mark involves third-party litigation funding (TPLF), specifically if the President-elect’s supports legislation promoted by Republican Sen. Chuck Grassley to increase the transparency and oversight of TPLF, which is blamed in part for so-called social inflation, multimillion dollar verdicts absorbed by liability insurers. “We don’t know if the next administration finds TPLF transparency favorable or unfavorable,” said Robert Gordon, senior vice president of policy research at the insurance trade group APCIA.

Tort reform, a perennial ambition of the property/casualty industry, is likely to remain just that in Trump 2.0. As Seaman put it, “If you’re looking at the federal government for tort reform, you’re looking at the wrong place.”

“If you’re looking at the federal government for tort reform, you’re looking at the wrong place.”

Scott Seaman, Hinshaw & Culbertson

“It’s not a priority,” Hartwig concurred, pointing out that the subject was not a major issue of either political party in the elections for President, Congress and state legislatures. “The industry will continue to swim upstream on this issue. There’s nothing to suggest this is anywhere on the radar scope of federal law enforcement or the federal courts,” he said.

“Will Trump support tort reform? The answer is no,” said Theodorou. “The next administration and the Republican Party have gone populist and favor the trial bar. Mr. Trump in his personal capacity has filed about 4,000 lawsuits, so I don’t think he’s about to celebrate tort reform.”

However, Gordon from APCIA said that tort reform support in the next administration is “a bit of a question mark. We don’t know where Trump is on that, and we have asked. It’s not for lack of trying,” he said.

Even without tort reform, the industry should be in fine shape in Trump 2.0, despite concerns to the contrary. “I’m continually told by consumer advocates that the industry’s losses are so big, insurance companies will roll up their tents and leave certain states, but Wall Street begs to differ,” said Theodorou. “During the first Trump Administration, insurance stocks in the S&P property/casualty specialty stock index went up by 40 percent. During the Biden Administration now ending, insurance stocks went up 91 percent. Wall Street has confidence in the insurance industry’s ability to survive and thrive, no matter who runs the country.”