How economic uncertainty is affecting your business clients

The current economic climate is making sustainability targets less of a priority for nearly three-quarters (72%) of Canada-based executives, according to a new report from Beazley.

“Executives are focusing on the challenges of the here and now, leaving their businesses unprepared and exposed to the intensifying environmental and climate risk,” the specialist insurance provider’s Spotlight on Environmental & Climate Risk 2025 report found.

There’s considerable uncertainty surrounding the Canadian economy due to threatened or in-place tariffs from U.S. President Donald Trump. This week, Trump announced a 25% tariff on auto imports that will come into effect next week. Prime Minister Mark Carney said in media reports he’s planning a comprehensive renegotiation of trade agreements and is considering billions of dollars in retaliatory tariffs.

Twenty-five per cent tariffs on raw materials like steel and aluminum already came into place earlier this month.

“In the current economic environment, executives are focusing on the here and now, risking missing the elephant in the room,” the report says, referencing extreme weather catastrophes such as the California wildfires. In Canada, insured losses from catastrophes cost a record-breaking $8.9 billion (and counting) last year, CatIQ president and CEO Laura Twidle told Canadian Underwriter in February.

Top risk

According to Beazley’s report, 31% of Canada-based executives rank economic uncertainty as their top risk, up from 26% in 2024. Released Thursday, the report includes the opinions of more than 3,500 business leaders and insurance buyers of businesses based in Canada, the United Kingdom, the United States, Singapore, France, Spain, and Germany.

Only 19% of Canada-based executives ranked climate and associated catastrophic risk as a top concern. However, 66% are adopting new risk management procedures due to extreme weather, the report says.

Nearly two-thirds (65%) of execs based in Canada say they are struggling with the transition to non-carbon energy sources, Beazley’s findings show. Yet concern around energy transition is falling, with only 18% selecting it as their greatest environmental risk this year, down from 20% in 2024.

“Significantly, our data show that for the second year in a row, Canada-based executives have underestimated the threat posed by the energy transition risk,” Beazley says in a press release. “However, this risk is expected to rise further up the agenda of global boardrooms over the next 12 months.”

Environmental and climate risks pose a number of insurance concerns, including:

• Substantial financial and reputational harm from environmental damage, with reputation risk amplified in the digital age,
• Directors’ and officers’ liability for not adequately addressing climate risks,
• Property and liability cover will need to adapt to include assets increasingly vulnerable to climate events,
• Business interruption insurance will become a necessity; and
• Supply chain risks are heightened by climate change, with raw material scarcities and transportation disruptions.

“By leveraging data, new insurance and risk mitigation solutions can be developed to support a more sustainable future,” the report says.

Beazley found 27% of Canada-based firms plan to explore insurance options this year, including risk and crisis management. And 39% of Canada-based executives say their trust in the value of insurance has increased.

“In this era of accelerating risk, businesses can’t afford to underestimate the impact that climate and environmental risk could have on their business,” says Beazley Group’s chief underwriting officer Paul Bantick.