Reinsurer Swiss Re has warned the insurance sector may get dragged into the fallout if the current tariff disputes become a fully-fledged trade war.

The warning came in London  as the Swiss Re institute issued its latest sigma report “Shifting Sands”, which predicts real global GDP growth is forecast to be stable from 2025, but below the pre-pandemic decade’s 3.1%.

However Jérôme Jean Haegeli, group chief economist of Swiss Re and head of Swiss Re Institute said the global economy was fragile and there were uncertainties which threatened global growth.

“We are seeing a reengineering of global supply chains and are likely to see significant investment in infrastructure and digital infrastructure. That Cap Ex will provide huge opportunities for insurers.,” he explained. “We do not see geopolitical risk as our number one risk. It is the risk of complacency. There is a lot of complacency and we are seeing perfection being priced into markets. But it is an area where insurers can support and provide greater resilience.”

On tariffs Haegeli said the USA had yet to feel the effect on those placed on countries across the world, however the threat of a trade war came with real risks to insurers.

He said while the current US tariff rate was at a 13% level, with the potential for that figure to fall to 12%, it is not seen as a concern.

“The tariff changes have bent but they have not broken the global trade system,” Haegeli continued. “They have been a huge shock  but if you look at the USA it has 13% of the global imports and 8% of global exports.

“If we look at the global tariff rate it is less than 2% and we remain confident the global economy can handle it. These tariffs are on goods but not on services, which remain a far larger part of the global economy.”

However he expressed concern for the ramifications should the situation deteriorate.

“It has not been a tit for tat trade war, but if we saw it spill into a trade war which included services it would become a significant problem for insurers,” Haegeli added.

The outlook itself said the world’s economy is entering the next phase of fiscal expansion and industrial policy dominance. While accommodative fiscal and monetary policies cushion growth against the impact of trade tariffs.

“Industrial policy is rewriting the economic playbook, AI is accelerating, growth looks strong, but the credit cycle will reveal how solid it really is. The re-industrialisation drive and technological transformation are powering activity and supporting the core of underwriting yet headline economic growth figures mask deeper structural fragilities that will surface once the credit cycle turns. Over the shorter term, we expect the economy to navigate a soft patch, with tariffs still feeding through to prices in the US and exports globally,” continued Haegeli.

The report said an evolving political economy with heightened reliance on industrial policy is among the structural regime shifts taking hold over the longer term. The increased risk of fiscal dominance – where central banks prioritise debt stability over price stability – and sustained industrial spending will keep inflation anchored above pre-2020 norms, keeping long-dated bond yields elevated.

It added the US will see real GDP growth moderate to 2% by 2026 and 1.9% by 2027, while the Euro area benefits from fiscal stimulus, notably Germany’s EUR 1 trillion investment programme (2026: 1.3%; 2027: 1.5%). China’s growth will moderate to 4.5% in 2026 and 4.2% in 2027, due to still weak domestic consumption and property-linked investment headwinds and despite a more accommodative policy stance. Emerging Asia will stay resilient under flexible monetary frameworks, benefiting from trade re-routing in a fragmented world.

“Industrial policy has returned to the core of national economic strategies,” the report explained. “The number of government interventions in industrial sectors has tripled since 2012, spurring a global race for technological and manufacturing leadership.

“While an evolving political economy with heightened reliance on industrial policy boosts domestic investment – particularly in semiconductors, AI infrastructure and defence – it also drives fragmentation and concentration risk.

“Industrial policy aims to build resilience but raises the risk of inefficiency, as firms accelerate a regional re-routing of supply chains, production operations and sourcing. For insurers, it means more opportunities in engineering, property and liability lines, but also more correlated exposures when shocks occur.”

Population ageing is reshaping labour markets, consumption, and protection needs, Swiss Re warned. Demand is shifting from family protection to longevity, retirement income and health solutions, requiring insurers to innovate and extend cover across longer lifespans. Ageing also changes asset-liability management dynamics, lengthening duration requirements and amplifying the importance of long-term solvency planning for insurers.