Why cargo clients’ tariff responses can create new exposures

Long lead times between U.S. President Donald Trump’s iterative tariff announcements and their eventual implementation have fuelled emerging trends in marine and cargo insurance lines.

Many Canadian and U.S. cargo owners and marine shippers stockpiled inventory before tariffs took effect, delaying any immediate cost increases on purchases, says Ryan O’Connor, North American regional head of ocean marine at Allianz Commercial.

Consequently, insurers have seen increased liability limit requests for stockpiled materials.

“The ocean cargo policy oftentimes provides storage coverage in warehouses and distribution centres — it’s called a stock throughput policy,” O’Connor says. “We had originally seen some requests for additional limits of liability at the warehouse and distribution centres in order for them to hold more goods to get them in before the tariffs.”

Related: Brokers say tariffs are affecting co-insurance terms in business policies

Insurers are also seeing clients request higher liability limits because tariffs and inflation have combined to increase the value — and loss risk — of stockpiled goods.

“The biggest concern for [insureds] is that they have enough limit of liability in their policies. Because something that might have been, say, a $10- or $12-million shipment might now be a $15- or $18-million shipment,” he says.

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So far, there haven’t been any significant changes in shipping routes due to the tariffs, O’Connor observes.

He says Canadian and Mexican marine and cargo companies are hesitating to make changes in their rail and truck shipment routes. Generally, they haven’t actively avoided transport through the U.S.

Related: Ways for specialty insurance clients to navigate U.S. tariffs

Adjusting shipping practices was a lesson learned by necessity during the COVID-19 pandemic, when some shippers pivoted from air to ocean freight due to air travel restrictions and lockdowns.

“Usually, aircraft [are] used for high-value, temperature-controlled goods,” says O’Connor. But during the pandemic, “we found that pharmaceutical care clients could not get aircraft space, so they were shipping it using a vessel.”   

However, shipping overseas via ocean vessel can take 30, 60 or more days, while an aircraft takes a day or two. “You’ve got more things that can go wrong, as your supply chain gets longer and has more touch points,” O’Connor says.

Changing modes of transportation today would introduce logistical challenges and loss risks such as increased transit time and greater exposure to theft or damage, O’Connor says. But if companies shift trade routes, “it’s important to know that it’s most likely covered under their policy,” he says.

Rather than adjusting modes of export, some companies are adjusting export destinations — sending more goods to Europe or Eastern Asia rather than the U.S.

Related: Why tariff deals, travel plans and income gaps matter for P&C pros

If insureds weren’t considering alternate shipping routes, however, now’s the time to do so, O’Connor advises.

“[Start] to anticipate potential changes and then plan for additional resiliency in your supply chain,” he says. “[Insureds] should be considering what they might need to do to change their supply chain, open up new markets or increase [the number of] other markets in addition to the U.S.

“Are there ways for me to get my goods from Mexico while maybe bypassing the U.S.? Does vessel traffic work for my business, or maybe even aircraft, if it’s high-value goods? Does that work rather than trucking it through, or [by] rail through, and paying tariffs?

“There are ways for Canadian businesses to diversify and to get through this, I would say, to blunt the effects of the tariffs as much as possible.”

This article is excerpted from one that appeared in the June-July, 2025 print edition of Canadian Underwriter.

Alyssa DiSabatino

Alyssa Di Sabatino has been a reporter for Canadian Underwriter since 2021, covering industry trends, market developments, and emerging risks.