2026 Manufacturing mid-year state of the market

The January 2026 outlook for manufacturing anticipated a year of strategic evolution, marked by accelerating automation, converging risk exposures, and disciplined underwriting. Through mid-year, that forecast has largely held, but several dynamics have intensified in ways that demand greater attention heading into the second half of the year.

Summary

Trade policy volatility has emerged as the single most disruptive operational force facing manufacturers, with shifting tariff policies creating significant operational uncertainty. Escalating conflict in the Middle East introduced additional freight disruption during the first half of the year. As a result, many manufacturers are reassessing supply chain resilience, business interruption exposures, and replacement cost assumptions.

Manufacturers also continue investing in advanced technologies. While these investments create opportunities for productivity gains, they also introduce risk considerations that insurers evaluate during the underwriting process.

PFAS compliance has shifted from planning to execution, with state reporting deadlines now in effect or rapidly approaching. Insurers continue broadening PFAS-related exclusions, increasing the importance of supply chain visibility, environmental risk assessment, and coverage review. On the casualty side, social inflation continues to pressure general liability, umbrella liability, and commercial auto markets, with little indication that severity trends will moderate in the near term.

In this environment, proactive planning, rigorous risk controls, and thoughtful program structure remain essential. The Baldwin Group partners with manufacturers to evaluate program structure, identify potential coverage gaps, and align risk strategies with operational realities.

Current trends

Tariffs, trade, and supply chain disruption

Trade policy volatility remains the defining challenge for manufacturers in 2026. Shifting tariff policies involving China, Europe, and key raw material-producing regions have increased input costs, extended lead times, complicated sourcing decisions, and delayed capital investment across the sector. Many manufacturers are balancing near-term cost pressures with longer-term questions around supplier diversification, inventory management, and production planning as trade policy continues to evolve.

Escalating conflict in the Middle East compounded these challenges during the first half of the year, disrupting key shipping routes and driving freight surcharges across raw materials, chemicals, components, and resins. In response, major insurers rerouted vessels around the Cape of Good Hope, increasing transit time and transportation costs across global supply chains. These developments have increased operational uncertainty while creating insurance considerations that many manufacturers have not yet fully evaluated.

• Business interruption – Manufacturers reliant on international suppliers should reassess contingent business interruption coverage and policy triggers. Contingent business income sublimits, waiting periods, and covered perils should be evaluated against current sourcing strategies to identify coverage gaps.
• War-risk premiums – Rising war-risk premiums and freight surcharges have increased transportation costs for raw materials, specialty chemicals, electronic components, and resins, adding pressure to operating expenses.
• Replacement valuation drift – Rising material costs and tariff-related price increases can affect reconstruction and replacement values. Manufacturers should review insured values regularly to help reduce the risk of underinsurance.
• Trade credit and political risk – Trade credit and political risk coverage are becoming increasingly relevant for organizations with significant cross-border exposure as geopolitical instability affects supplier reliability, transportation networks, and contract performance.

Manufacturers that align their insurance programs with evolving sourcing, transportation, and geopolitical realities are better positioned to avoid coverage gaps and strengthen operational resilience when disruption turns into loss.

Technology adoption risks

Manufacturers continue accelerating investments in automation, AI, robotics, and connected production technologies to address workforce challenges, improve efficiency, and strengthen operational resilience. While these technologies can enhance productivity, quality control, and supply chain visibility, they also introduce new operational, cyber, and liability considerations.

As manufacturing environments become more connected, disruptions that once affected only IT systems can now interrupt production, impact product quality, or trigger broader operational losses, making technology governance and cybersecurity increasingly important underwriting considerations.

• AI-enabled operations – Manufacturers are increasingly deploying AI for quality assurance, predictive maintenance, inventory optimization, and production planning. As adoption expands, governance, testing, and documentation practices are becoming increasingly important considerations.
• Operational technology (OT) – Connected equipment, industrial control systems, and smart factory initiatives continue expanding the cyberattack surface. Insurers increasingly evaluate IT/OT segmentation, incident response planning, and cybersecurity controls when assessing risk.
• Product quality and liability – Automated decision-making, connected products, and technology-enabled production processes are creating new considerations around product performance, quality assurance, and liability.
• Business interruption dependencies – Reliance on interconnected technologies can increase operational disruption if system failures, supplier outages, or cyber incidents affect production environments. Business interruption and cyber coverage should be reviewed to ensure alignment with evolving operations.

Manufacturers that pair technology investment with strong governance and cybersecurity controls can improve resilience while managing the risks that accompany increasingly connected operations.

PFAS regulation and liability

PFAS regulation has become tangible for manufacturers as state reporting deadlines take effect and product restrictions expand nationally. What was a longer-term compliance concern is now creating immediate operational, regulatory, and liability challenges for manufacturers that produce, distribute, or rely on PFAS-containing products.

While portions of the federal regulatory framework remain in flux, state-level enforcement, reporting requirements, and product restrictions continue expanding, increasing complexity for organizations operating across multiple jurisdictions. As a result, manufacturers face a fragmented compliance landscape where obligations and exposures can vary significantly by geography, product category, and supply chain involvement.

• Federal regulatory shift – The EPA has proposed scaling back portions of the PFAS drinking water standards while simultaneously advancing expanded reporting under TSCA, RCRA, and NPDES frameworks. Federal changes do not necessarily reduce exposure, as state-level developments and litigation activity continue to evolve.
• Minnesota – The PFAS Reporting and Information System (PRISM) launched in January 2026, with initial reporting requirements taking effect July 1, 2026.
• Connecticut – Written notification requirements for certain PFAS-containing products, including apparel, carpets, cleaning products, and cosmetics, take effect July 1, 2026.
• Colorado – Additional PFAS reporting requirements are now in effect for products including cookware, firefighting PPE, and apparel designed for extreme use.
• Maine, Washington, and other states – Product restrictions, reporting requirements, and reviews of “currently unavoidable use” exemptions continue expanding across multiple categories.
• Insurance implications – Insurers continue broadening PFAS-related exclusions across general liability, product liability, and umbrella policies, increasing the importance of environmental coverage evaluations and policy review.
• Supply chain visibility – PFAS mapping, supplier due diligence, reformulation efforts, and contractual risk transfer remain important strategies for managing regulatory and liability exposures.

Strong quality-control programs, documented safety practices, and disciplined risk-management efforts can help manufacturers navigate an increasingly challenging liability environment.

Casualty and liability

Casualty conditions remain challenging for manufacturers as social inflation continues to drive loss severity across general liability, commercial auto, and umbrella lines. Nuclear verdicts, litigation funding, and expanding theories of liability continue influencing underwriting decisions, contributing to pricing pressure and increased scrutiny of casualty risk. Reflecting these trends, AM Best maintains a Negative outlook on the general liability segment, citing adverse loss development on both current and prior accident years.

As operational and liability risks continue to converge, organizations should evaluate whether their casualty programs remain aligned with changing business operations and emerging sources of loss.

• Product liability – Product liability is an area of heightened focus as manufacturers adopt AI-enabled processes, connected equipment, and smart factory technologies. New questions around product performance, quality assurance, and liability are emerging, requiring manufacturers to evaluate if products/completed operations coverage adequately addresses evolving exposures.
• Umbrella and excess capacity – Capacity remains constrained for accounts with severity-driven loss histories, and layered program structures are increasingly common for organizations seeking higher limits.
• Commercial auto – Pricing continues to rise, particularly for larger fleets and accounts with distracted driving concerns, adverse loss experience, or elevated transportation exposure.
• Underwriting scrutiny – Insurers continue placing greater emphasis on contractual risk transfer, quality-control procedures, loss-control documentation, and operational governance when evaluating casualty risk.

In a casualty market increasingly focused on severity and risk quality, strong quality-control programs, documented safety practices, and disciplined risk management remain critical underwriting considerations.

Turn insight into action

As manufacturers navigate an increasingly interconnected risk environment, insurance programs must keep pace with evolving operational realities. Trade disruption, technology adoption, regulatory complexity, and casualty pressure are no longer isolated challenges — they increasingly influence one another in ways that can affect business continuity, profitability, and long-term resilience.

The Baldwin Group helps manufacturers align risk management and insurance strategies with changing business needs. Through our proprietary RiskMap process, we evaluate program structure, identify potential coverage gaps, and help organizations address emerging exposures across their operations, supply chains, and technology environments. Acting as an extension of your team, we help build resilience, strengthen risk controls, and position your organization to navigate change with greater confidence.