Overview
The collapse of US-Canada trade negotiations has changed the cost outlook for insurers and companies with cross-border operations.
Days after talks raised expectations for lower tariffs, the US proceeded with 50% duties on roughly $20 bn of Canadian goods. Canada plans retaliatory tariffs beginning September 8.
For insurers, the dispute reaches beyond trade volumes. Higher import costs affect vehicle repairs, construction materials and commercial property losses. Cross-border credit exposures also change when tariffs alter transaction economics, Beinsure noted.
Global growth is decelerating as US tariff policy reduces trade and heightens uncertainty. Consumers and firms have likely already begun cutting spending and investments in response to the uncertainty, which may not be fully visible in the economic data yet.
Insurance lines affected by US-Canada tariffs
| Insurance area | Tariff-related pressure | Potential insurance effect |
| Personal auto | Higher prices for Canadian-made vehicles and imported parts | Higher repair costs and physical damage claim severity |
| Commercial auto | More expensive parts and equipment | Higher claims costs and longer repair periods |
| Homeowners | Higher prices for construction materials | Increased replacement and reconstruction costs |
| Commercial property | More expensive steel, aluminum and building materials | Higher property loss severity |
| Business interruption | Longer material lead times and supplier changes | Extended restoration periods and larger income losses |
| Contingent business interruption | Supplier disruption without physical damage | Coverage disputes where physical damage triggers aren’t met |
| Trade credit | Higher costs for Canadian buyers importing US goods | Greater buyer nonpayment exposure |
| Surety | Higher input costs under fixed-price contracts | Greater contractor default and performance risk |
| D&O | Country-of-origin, labeling and transshipment investigations | Possible regulatory defense costs, subject to policy terms |
According to Swiss Re Institute‘s World Insurance sigma, global GDP growth (inflation adjusted) is expected to slow to 2.3% in 2025 and 2.4% in 2026 from 2.8% in 2024.
The global insurance industry is expected to follow the trend with total premiums expected to slow to 2% this year from 5.2% in 2024, picking up marginally to 2.3% in 2026.
While insurers’ profitability outlook is still benefiting from rising investment income, we expect tariffs to slow global GDP growth, and consequently weigh on insurance demand.
5 key highlights
- The US imposed 50% tariffs on about $20 bn of Canadian goods after trade negotiations collapsed, while Canada plans retaliatory tariffs beginning September 8.
- APCIA previously estimated tariffs could add roughly $30 bn to $61 bn to US personal auto claim costs over 12 months.
- Verisk reported US reconstruction costs rose 3.6% between April 2025 and April 2026, increasing the cost base for property claims.
- Allianz Risk Barometer 2026 found 49% of respondents were renegotiating or diversifying supply chains because of changing trade conditions, including tariffs.
- The tariff dispute affects property, auto, business interruption, trade credit, surety and D&O exposures as companies change sourcing and contract structures.
The volatile nature of US policy changes under the current administration has ushered in a paradigm shift of diminished confidence in the US government, eroding its status as a “safe haven” for global capital.
After several years of the fastest growth in the US (compared to Canada, UK, Germany, Italy, France, Japan, Australia) post-pandemic, US GDP growth is forecast at 1.5% this year (slowing from 2.8% in 2024).
Consequently, Swiss Re Institute has lowered growth expectations for most major economies in 2025.
US tariffs impact the primary insurance industry through premium growth, claims and investment returns, with differing effects by geography. We see the greatest and most direct impact on non-life claims severity in the US, most notably in US motor and construction.
US-Canada tariffs increase auto and property insurance claims costs
Before negotiations broke down, a prospective agreement included lower US tariffs on Canadian-made vehicles. Duties would have fallen from 25% to 15%. Steel and aluminum tariffs were also expected to decline, from 50% to 25%.
According to Beinsure, lower rates would have reduced some cost pressure across auto and property claims. Imported parts, metals and construction products feed directly into insurer loss costs when vehicles or buildings require repair.
In spring 2025, the American Property Casualty Insurance Association estimated tariffs then in effect might add roughly $30 bn to $61 bn to personal auto claim costs over 12 months.
Repair inflation was already affecting insurers before the latest tariff measures.
Verisk reported total US reconstruction costs, including materials and retail labor, increased 3.6% between April 2025 and April 2026. Growth had slowed from 5.2% during the previous 12 months, though replacement costs were still moving higher.
US-Canada tariff figures affecting insurance costs
| Indicator | Figure | Insurance relevance |
| New US tariffs on affected Canadian goods | 50% | Raises costs across imported goods and materials |
| Canadian goods affected | About $20 bn | Expands commercial exposure across cross-border trade |
| Proposed vehicle tariff before talks failed | 15% | Would have fallen from 25% |
| Proposed steel and aluminum tariff | 25% | Would have fallen from 50% |
| Estimated personal auto claims impact | $30 bn-$61 bn | APCIA estimate for tariffs in place during spring 2025 |
| US reconstruction cost increase | 3.6% | Verisk figure for April 2025-April 2026 |
| Previous reconstruction cost increase | 5.2% | Increase during the preceding 12 months |
| Companies changing supply chains | 49% | Allianz Risk Barometer 2026 |
| Respondents calling supply chains very resilient | 3% | Indicates limited confidence in supply chain stability |
| Canadian retaliatory tariffs | Start September 8 | Adds exposure for US exporters |
The collapse of negotiations changes that outlook again. US tariffs now cover Canadian exports including furniture, dairy products, cement and clothing.
Canada said its September measures will target US steel, dairy products, appliances and agricultural equipment, along with pulp, paper and electronics.
Those categories touch multiple commercial insurance lines.
Higher material prices raise the cost of repairing damaged property. More expensive auto components affect physical damage claims, while longer sourcing times leave vehicles in repair shops for longer periods.
Supply chain changes increase BI exposure
Tariffs also alter supply chains. Companies facing higher import costs have been changing suppliers, renegotiating contracts and carrying different inventory levels. Those decisions affect assumptions insurers used when commercial policies were originally priced.
The Allianz Risk Barometer 2026 found 49% of respondents were renegotiating or diversifying supply chains in response to changing trade and investment conditions, including tariffs.
Only 3% described their supply chains as “very resilient.”
For insurers, supplier changes matter because business interruption exposure depends partly on how quickly a company restores operations after a loss.
Supply chain changes and insurance underwriting risks
| Business change | What insurers should review | Main concern |
| Supplier replacement | New supplier locations and capacity | Longer recovery after a covered loss |
| Longer shipping routes | Delivery times and logistics dependencies | Extended business interruption periods |
| Greater supplier concentration | Reliance on fewer vendors | Larger losses after one supplier disruption |
| Higher inventory levels | Updated property values | Possible underinsurance |
| More expensive materials | Replacement-cost assumptions | Higher claims severity |
| Fixed-price contracts | Contractor margins and cost escalation terms | Surety and performance bond exposure |
| Cross-border customer credit | Buyer finances and payment terms | Trade credit losses |
| New sourcing jurisdictions | Origin documentation and customs controls | Regulatory and D&O exposure |
| Tariff-driven shutdowns | BI and CBI policy wording | Economic disruption might not trigger coverage |
A manufacturer previously sourcing components from a nearby Canadian supplier might move production elsewhere to control tariff costs. Replacement suppliers might sit farther away, require longer shipping times or operate with less spare capacity. That changes potential restoration periods.
Supplier concentration also matters. If a business shifts purchases toward fewer vendors, one disruption might affect a larger share of production.
Material lead times, insured property values and expected replacement periods might no longer match assumptions used when the policy was placed. Insurers reviewing renewals will need updated information on sourcing arrangements where tariff policies have changed procurement decisions, Beinsure’s analysts said.
Longer repair periods carry a direct claims consequence. Commercial property damage often generates both physical repair costs and lost income. If imported equipment or materials take longer to arrive, the insured business remains partially or fully closed for longer.
That pushes business interruption losses higher even when the original property damage hasn’t changed.
Cross-border credit risks move higher
Canada’s retaliatory tariffs also affect US exporters selling goods north of the border. Companies extending payment terms to Canadian customers face a different credit profile when tariffs increase the final cost of imported goods. Transactions that worked economically before the tariff increase might become harder for buyers to finance.
Political risk insurance addresses certain government actions that prevent companies from completing contractual obligations. The current tariff dispute sits close to both areas because government decisions are changing pricing and contract economics.
Not every tariff-related loss will trigger coverage. Government duties might force companies to renegotiate contracts without creating an insured event. Insurers will need to examine the policy language, the reason for nonperformance and any exclusions tied to government action.
US manufacturers dependent on Canadian materials face another problem
Higher input costs reduce margins under fixed-price contracts. A company committed to delivering work at a predetermined price might absorb substantial additional costs if imported steel, machinery or other components suddenly become more expensive. That pressure affects surety and performance bond exposure.
Contractors with thin margins have less financial room when material costs rise unexpectedly. Sureties assessing new obligations will therefore need current information on tariff exposure, sourcing plans and contractual mechanisms for passing higher costs to customers.
Business interruption coverage has limits
Tariff-related disruption doesn’t automatically qualify as a business interruption claim.
Many contingent business interruption policies require physical damage at a supplier or customer location before coverage applies.
A supplier that stops shipments because tariffs made the transaction uneconomic hasn’t necessarily suffered physical damage. In those circumstances, the policy trigger might never occur.
Companies with cross-border supply chains therefore face a possible gap between operational disruption and insurance recovery. The commercial loss might be substantial even when policy wording provides no response.
This distinction becomes more important as companies restructure sourcing arrangements because of tariff costs rather than fires, storms or other insured property events.
Compliance exposure also grows
The tariff dispute creates regulatory exposure around country-of-origin rules, labeling and transshipment.
Companies importing through multiple jurisdictions need accurate documentation showing where goods were produced and whether a specific tariff applies. Incorrect declarations might lead to investigations, penalties or customs disputes.
Those matters might also reach D&O insurance. Coverage depends on the specific policy, including regulatory defense provisions and conduct exclusions.
The insurance effect of the US-Canada tariff dispute therefore extends across claims, underwriting and commercial risk management.
Auto and property insurers face higher repair expenses. Commercial carriers need to reassess supplier dependencies and restoration assumptions.
Trade credit insurers face changing buyer economics, while surety providers must consider the effect of higher input costs on fixed-price contracts.
The immediate tariff rates are only one part of the exposure. Changes in sourcing, contract terms and repair timelines will determine how much of the trade dispute eventually reaches insurer loss ratios.
FAQ
How do US-Canada tariffs affect insurance claims costs?
Tariffs raise prices for imported vehicle parts, steel, aluminum and construction materials. Higher replacement and repair costs increase potential losses for auto and property insurers.
How much could tariffs add to US personal auto claims?
The American Property Casualty Insurance Association estimated in spring 2025 that tariffs then in effect might add about $30 bn to $61 bn to personal auto claim costs over 12 months.
Why do tariffs affect business interruption insurance?
Tariffs can change suppliers, shipping routes and material lead times. Longer repair periods can increase business interruption losses after covered property damage.
Does business interruption insurance cover losses caused directly by tariffs?
Many contingent business interruption policies require physical damage at a supplier or customer location. A disruption caused only by higher tariff costs might therefore fall outside the policy trigger.
How do tariffs affect trade credit insurance?
Higher landed costs can weaken buyers’ finances and increase nonpayment risk. Trade credit insurers therefore face changing exposures when tariffs alter the economics of cross-border transactions.
What risks do US manufacturers face under fixed-price contracts?
Higher costs for Canadian inputs can reduce margins on contracts with fixed pricing. That financial pressure can affect surety underwriting and performance bond exposure.
Can tariff disputes create D&O insurance claims?
Regulatory investigations involving country-of-origin rules, labeling or transshipment can involve D&O policies. Coverage depends on regulatory defense terms, exclusions and the conduct alleged.
………………..
AUTHOR: Tetiana Mykhailova — Commercial Director of Finance Media, CFO Beinsure
