Why clients don’t spend soft-market savings on insurance upgrades

In soft markets, commercial clients often take savings from reduced premiums and use them to enhance coverage. For example, they might extend their business interruption (BI) indemnity periods, buy higher limits, or add new protection to their policies.

Today, that flexibility is gone.

Instead of adjusting limits or extending the indemnity period to match the longer rebuild times, many commercial insurance clients are simply renewing their existing program structures, despite their risk profiles changing because of uncertain tariff mandates.

Tariff impacts

Tariffs imposed by the U.S. in early 2025, and countered by Canada, triggered rapid price inflation for both labour and construction materials in Canada. 

But despite evidence of supply chain delays and other tariff-related factors prolonging rebuilding and restoration timelines, most commercial policyholders aren’t changing their coverage to reflect that risk, say experts during a panel discussion at the recent RIMS Canada Conference in Calgary.

Policyholders are “generally buying what they bought last year,” says Amy Barnes, head of energy, power and climate sustainability strategy at Marsh.

“In the past, when we’ve had soft markets, people have used some of the premium savings to enhance their coverage,” she says. “And we would often give that advice, because…even though [risk managers] have got a very large spend, [they] often have very little discretion over that spend.

“The pressures on organizations are such that those savings are captured [on corporate balance sheets], as opposed to typically being redeployed to invest in broader coverage.”

People take the savings “because it’s a really difficult economy,” adds Barnes.

Ready to renew?

Ahead of renewals, brokers can advise what to do when budget constraints prevent their commercial clients from upgrading their insurance programs, say RIMS panellists.

Proactive engagement with clients, alongside detailed documentation, makes a significant difference in securing appropriate coverage in today’s volatile construction and supply chain environment. Brokers should start renewal discussions with commercial clients early and work closely with underwriters to assess supply chain vulnerabilities that could affect rebuild or repair timelines.

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A U.S. loss experienced by a Canadian energy company a few years ago illustrates why commercial clients should revisit BI coverages, Barnes says.

“They had significant challenges with their rebuild due to environmental permitting — [because] there was environmental harm caused by the loss. That meant the permitting for the rebuild took a really long time,” she says. “What would have been…a six-month business interruption became close to 20 months, causing the insurers a significantly greater loss.”

Giving clients similar examples may convince them to revisit BI coverage, especially since tariffs can burn through indemnity quickly. “It comes back to the underwriting relationship with the insurers and how you disclose information,” Barnes says.

Brokers should approach clients early in the renewal process to make sure BI coverages reflect current cost structures — including higher material and labour expenses, and longer lead times for critical components.

Contingency plans

Panellists also recommend reviewing contingent business interruption, ingress/egress, and delay-in-startup coverages to ensure they align with the client’s updated risk profile.

Where standard policy wordings fall short, brokers and insureds can negotiate tailored language to address specific tariff-related disruptions or even develop custom endorsements to close potential coverage gaps.

“Any opportunity you have to get in front of your underwriters — do so,” Cyndi Ruff, insurance manager at Gibson Energy Inc. tells the RIMS panel. “We’re in a time of cost-cutting, but cost-cutting meetings with your insurers is not [a form of] savings whatsoever.”

Meanwhile, risk managers should seek ways to extend their indemnity periods where possible, she says.

“I front-ran that piece [when I] knew the market was softening, and I said, ‘I appreciate that we can grab some savings, but I would like to put it back to the [insurance] program.’ And [the organization] agreed with me,” adds Ruff.

“We added six months to our indemnity period. I’m one of those people who will have an 18- to 24-month indemnity period, just between the regulatory compliance to rebuild what I have and where I have it, and then how long it will take me to get the equipment, how long it will take me to get the steel.”

This article is excerpted from one that appeared in the December 2025-January 2026 print edition of Canadian Underwriter.