Article first published in Insurance Day
Pro-business policies could create a mostly favourable outlook
In global politics, as in business, few things are certain. That was borne out in the recent US presidential election and the world of business is now trying to ascertain what Donald Trump's surprise victory means for them. For non-US insurers operating in the US, Clyde & Co sees reason to believe that a Trump presidency could create a mostly favourable outlook.
While a Republican-controlled Congress and a Republican president may agree on many things, quick enactment of the broadly pro-business agenda proposed in Trump's campaign is far from assured. Nevertheless, we see an increased likelihood of the following:
Tort reform: Republican administrations and lawmakers have historically supported legal reforms. Tort reform is likely to benefit both defendants facing litigation as well as their insurers. While Trump was known for litigiousness regarding his business interests, he has suggested he will appoint judicial nominees with reputations for conservatism.
If tort reform hinders expansion of litigation and outsize damage awards, that's positive for insurers. UK insurers exposed to US casualty risks would benefit even from a modest reduction in litigation expenses.
Change in the Supreme Court: Trump has the opportunity to fill the vacancy left by the late Justice Antonin Scalia. Observers and Trump himself have indicated that he will seek to appoint nominees who follow Justice Scalia's narrow interpretation of the law. Justice Scalia favoured legal analysis and gave primacy to contract wordings, a perspective that, if followed, could benefit insurers when coverage lawsuits come before the Supreme Court.
Business-friendly domestic policy: The president-elect's campaign emphasised his experience as a billionaire entrepreneur and he has pledged to boost jobs and economic growth. Plans to achieve those goals remain to be seen, though infrastructure spending and tax changes are the most likely approach.
In general, robust economic activity is of course positive for insurers' growth and profitability – through greater demand for coverage, potentially lower corporate taxes and an improved investment climate. A caveat would have to be any growth-depressing effects that a protectionist trade policy might have in the medium- to long-term.
Higher energy production: One of Trump's campaign pledges was to increase US energy production and energy independence. Policies that promote energy projects are likely to be sources of growth for London market insurers, many of which are key sources of capacity for onshore and offshore energy risks as well as construction.
More broadly, insurers are unlikely to see a dramatic change in the claims environment under a Trump administration. Volatility in risk does not appear to be reducing; in fact, global volatility seems to be an increasing concern for insurers.
International trade remains a major question mark, particularly given Trump's numerous statements about renegotiating existing agreements or abandoning those currently in train. A protectionist trade policy is likely to bode badly for multinational businesses, including insurers, and could lead to an increase in litigated disputes.
On balance, we are hopeful the outlook for insurers under a Trump presidency will be largely positive. As always with government policy, the devil will be in the detail, but we are optimistic that the intimated pragmatic pro-business agenda will be something that insurers can work with.