For brokers, the trade war has a silver lining

Tariffs on Canadian goods entering the U.S., as well as Canadian counter-tariffs, are creating confusion for commercial insurance clients. And the on-again, off-again approach to tariffs — and see-sawing of which goods will be tariffed — makes matters worse.

“Your economics could change pretty quickly… your cost of goods [and] your total revenue coming through,” says Adam Mitchell, CEO of Mitch Insurance. “You’re going to have to watch and review your policy kind of regularly over the next little bit…it’s really dynamic.”

But there’s a silver lining in all the hassle and confusion. It creates a perfect excuse for brokers to check in with their commercial clients.

“Although you’ll probably know very quickly that you’re in a tariffed area, you may not think to visit your insurance,” Mitchell tells CU. “Brokers are always looking for times to be relevant. Now’s a pretty good time to send a note to your clients and say, ‘Hey, you may be affected, or you may have a friend that’s affected, but now’s a good time to have a chat, and let’s make sure the shoe still fits.’”

Material shifts

Even before tariffs were implemented, many Canadian businesses reported they were exploring alternative sources for raw materials and other industrial and manufacturing inputs. And some brokers said they were advising commercial clients to re-shore or friend-shore aspects of their supply chains.

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Such shifts directly impact commercial clients’ insurance needs.

“If a business [is] dealing with a new a new source for materials, they may have different insurance requirements versus using a supplier from the States. You may have to adjust your coverage limits. Some suppliers may want you to have $5 million commercial general liability, versus $2 million. They may want you to carry higher cyber liability limits,” says Jake Hovinga, commercial lines manager at Mitch Insurance.

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Likewise, efforts to remove interprovincial trade barriers so Canada can strengthen its internal economy may also shift commercial clients’ insurance needs.

“You would have to adjust their cargo policy. They may be shipping goods more by rail or by transport [trucks] versus air or ocean shipping. You would have to adjust the revenues by that and adjust the exposure by that on the cargo policy and limits,” adds Hovinga.

Mitchell says the change “could shift the business” in a positive direction if companies that had primarily exported to the U.S. begin selling mostly across Canada.

“Insurance companies get kind of squeamish of U.S. exposure. So, if you’re now selling a lesser amount to the States because these [internal Canadian] barriers drop…you’re actually going to save some money if you update your exposure.

“If it’s a big enough difference that you shift your business to Canadian sales versus U.S., a different insurance company might be interested in you. There [are] limited [numbers of] companies that will give you U.S. exposure, where if you flip to now being a Canadian distributor, your whole profile could have changed.”

In all, the tariff worries create multiple reasons for brokers to contact clients to see if any insurance coverage windfalls can be found.

“It may even reduce their premiums and overhead,” adds Hovinga.

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.