Are commercial clients adding risk to their storage rooms?

Tariff concerns are inducing some companies to stock up on goods or manufacturing components before those levies kick in. And that’s causing a spike in warehousing that can necessitate higher limits for both the quantity and value of goods being stored.

Tariffs act to increase the value of goods roughly in line with the percentage of those tariffs, says Jake Hovinga, commercial lines manager at Mitch Insurance.

Plus, some companies may see warehouse volumes continue to rise as they wait for clarity about tariffs that are proposed but not finalized.

“The risk that can create is that the…stock value associated with that location may be underinsured, and they may have issues with respect to the insurance policy covering the full value of those goods that are warehoused at that specific location,” says Michael Lewis, chief commercial officer at Marsh McLennan Canada.

Related: Why trade wars make commercial coverage reviews critical

What’s more, issues around delivery delays emerge when merchandise must be warehoused at facilities located farther away from retail end users.

“The ability to deliver that good at the time when it is required, and the potential delays, is generally an uninsured risk for a lot of organizations,” Lewis tells Canadian Underwriter. “There’s marine cargo, although people think the policy stays quiet on it, it is actually a noted exclusion on the policy.

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“Subsequently, the marine cargo insurance policies a lot of people have won’t cover delays in goods reaching their end customers.”

Increased storage volumes also require clients to better protect goods awaiting transit.

“From a protection standpoint, those warehouses may not be designed for the goods being put into them,” says Daniel Kotwinski, who heads Marsh Advisory Canada.

“Firstly, that creates a fire protection challenge. But oftentimes that’s an insurability challenge as well: we now have a higher volume of materials we can’t [necessarily] protect…so property risk engineers and insurers are looking at that quite dramatically.” 

Related: How tariffs may impact insurance for Canadian liquor sellers

Additional fire risks emerge when clients use warehouse spaces inappropriately.

“When the…[goods stored] start filling the aisles, for example, that’s what creates an additional level of risk, because oftentimes a warehouse is not designed to have fires within that aisle space,” he says. “If something were to happen [it] can compound the effect, which makes it difficult to firefight.”

Further, increasing loads in refrigerated warehouses can create spoilage risks.

“If your equipment is overworked [or] you’ve been moving a lot of product into an area too quickly…you can have an equipment breakdown, causing an additional spoilage,” Kotwinski says. “There’s always the potential that [coverage levels] from that particular sublimit may not line up with the insured values.”

Finally, centralizing large amounts of risk through confined geographic areas also complicates the shipment of goods.

“It creates a lot of demand and stress on the local economy through that area, [things] that the roads and drivers aren’t previously used to. So having the right fleet safety controls to make sure that product flows appropriately to that location with trained individuals…also helps to limit a lot of the public safety issues that could arise if it hasn’t been prepared for appropriately,” he says.

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

Phil Porado

Phil, an award-winning journalist with over 30 years of experience in financial topics, has been managing editor of Canadian Underwriter for more than three years.