What a recession could mean for Canada’s commercial brokers

It remains unclear how much damage the ongoing trade war with the U.S. will inflict on Canada’s economy.

Negotiations aimed at producing a replacement for the not yet expired United States-Canada-Mexico trade agreement stalled last week with the White House imposing a 35% levy on Canadian goods entering the U.S. that aren’t covered by that agreement, and leaving in place higher tariffs on steel and aluminum set earlier this year.

That’s much higher than the 15% tariff deals recently struck with Japan and Europe, and higher than the 17% effective tariff rate recorded by investments, ratings agency Fitch said in a recent report.

Meanwhile, revisions to both Canadian and U.S. reports on gross domestic product and other lagging economic indicators show a spike in purchases of imported goods by both countries during first quarter 2025 as businesses stocked goods to get ahead of tariff hikes. What’s more, other aspects of those reports indicate rising tariffs are beginning to soften economic activity more broadly.

That data, P&C industry sources tell CU, suggests brokers should be checking with clients about inventory buildup to ensure those stocks are properly insured.

Among other things, brokers should look at receivables insurance that can protect a business that’s not turning over inventory, and commercial co-insurance policies which require policyholders to carry a certain percentage of their property’s value in insurance coverage.

Why innovative customer experience will define the future of personal auto insurance Image

Insights Paid Content

Why innovative customer experience will define the future of personal auto insurance

Technology is helping insurers reimagine how they support personal auto customers — and it starts the moment a collision is reported, say experts at Accident Support Services International.

By 

Sponsor Image

Plus, the trade war is sparking economic uncertainty that’s wreaking havoc for goods transportation companies, causing insolvencies in both Canada and the U.S. at levels not seen since the 2008-09 financial crisis, Michael Lewis, chief commercial officer at Marsh McLennan Canada tells CU.

That’s raised concerns about protections related to on-time delivery of goods to end customers — and the impacts stemming from any failure to make that happen.

“Companies are demanding trade credit insurance because of that risk they’re holding on their balance sheets with respect to being paid for the delivery of those goods,” he says.

“Right now, the capacity associated with trade credit is fine. We do see that there’s potential risk later that capacity may be challenged because of the continued uncertainty of tariffs and insolvencies increasing.”

He adds his firm’s exploring a variety of parametric products to cover some of these emerging risks. In parametric policies, insurers and insureds agree on threshold events or losses that trigger insurance payments. 

Meanwhile, a blog posted by Hub back in the spring notes tariffs “could result in delayed or non-payment of goods from companies that cannot afford to pay tariffs or whose business comes under severe financial stress from export sales.”

Such risks have clients exploring trade credit insurance to protect them from non-payment for goods and services, the blog notes, adding: “lenders often allow organizations with trade credit or accounts receivable insurance to borrow against a higher percentage of their accounts receivable than for companies that don’t.”

That could change, Hub says, if tariffs push up total accounts receivables at companies. In that case, “lenders are likely to tighten up lending on accounts receivable from foreign buyers and possibly make trade credit insurance a condition of lending.”

Parts of this article are 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.