How expanded steel tariffs are affecting farm insurers

Facing expanded U.S. tariffs on steel and aluminum, it might be time to apply inflation factors to farm machinery on an annual basis, one farm insurance expert tells Canadian Underwriter.

On Aug. 19, the U.S. Department of Commerce added 407 product categories to the list of derivative steel and aluminum products covered by tariffs. The steel and aluminum content of these products is now subject to a duty rate of 50%.

RealAgriculture, a national agriculture publication in Canada, reports the list of products includes multiple sizes of tractors, combines and combine headers, grain carts (depending on how the import category is defined/enforced), and some grain handling equipment. Used equipment is also subject to the tariff.

“There are [a] litany of cost pressure[s] facing the agriculture segment and this is one that might need some attention to ensure a stable and predictable ag insurance market,” Ken Worsley, chief operations officer with Nova Mutual Insurance Company, writes in an Aug. 22 LinkedIn post. “Farmers, brokers/agents could be put in a tough position come claim time when insured values are inadequate, not to mention increase[d] costs for parts for regular maintenance.”

Worsley was referencing a story in RealAgriculture that reported several Canadian agricultural manufacturers have seen shipments to the U.S. come to a standstill following the expansion of U.S. tariffs on products containing steel and aluminum.

Not commonplace

Depending on the market, it might be time to apply inflation factors to farm machinery on an annual basis, Worsley says. His company is not contemplating adding inflation to farm machinery. He tells CU he’s only aware of a couple of farm insurance providers that presently add some inflation factor annually for farm machinery limits, “and only then if a true replacement cost form is used or if the farm machinery is insured under a blanket POED (Property of Every Description) form.”

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Replacement cost forms for farm machinery usually have a provision that allows for replacement costs on machinery that is five years from date of sale on a new unit. This can be increased to 10 years if limits remain at replacement cost value on the policy, Worsley adds. “This requires the broker and farmer to be up to date on farm machinery annually at time of renewal to ensure the proper limits are there if a claim were to occur.”

He says there’s a lot of leased equipment now on farm machinery schedules and at some point, leasing companies and/or manufacturers will want to ensure they’re protected, similar to how mortgage companies now require guaranteed replacement costs on homes. “Though I do not see a guaranteed replacement cost option coming to farm machinery any time soon,” Worsley says.

“The uncertainty of tariffs and trade issues and what we know right now around steel and aluminum tariffs are driving up these costs,” he adds. “Factor in the disparity around the Canadian dollar versus the U.S. dollar [and this] further increases the costs.

“There are manufacturers in Europe and Asia, but the big numbers are still with American manufacturers.”

Applying inflation factors to farm machinery could potentially provide more predictable and sustainable farm insurance rates over the long term, as loss costs trend down in the segment.

It’s too early to say what the true impact of these tariffs will be, but costs will increase based on steel and aluminum alone, Worsley says.

Not agriculture-specific

“This is not an ag-specific issue by any means,” he says. “The farm dwellings will also see insurance-to-value issues from this trade uncertainty now and when CUSMA [the Canada-United States-Mexico Agreement] is renegotiated for July 2026.

“Basically, everything the home is constructed of and everything inside will cost more to replace come claim time.”

What can the industry do to help mitigate tariff impacts?

“Brokers can offer coverage options from actual cash value forms, higher deductibles, and even self-insurance on some assets to keep costs down,” Worsley says. “Ensuring open communication to the farmer on what the impacts of these [tariffs] mean at the outset is key.”

Jason Contant

Jason has been an award-winning journalist with Canadian Underwriter for more than a decade, including the past three years as associate editor and, before that, as digital editor for seven years.