As global trade tensions fluctuate and new tariffs are imposed or adjusted, their effects extend far beyond international economics. They could also have a direct and growing influence on the property insurance marketplace. From strained supply chains to rising replacement costs, tariffs could reshape how insurers and insureds evaluate risk and price protection.
SUPPLY CHAIN DISRUPTIONS
Tariffs can significantly disrupt global supply chains, especially for businesses that rely heavily on imported materials and goods. When tariffs are imposed on essential components, companies are often forced to pivot — either by finding alternative suppliers, which may not meet the same quality or cost standards, or by adjusting manufacturing processes entirely. These transitions can cause production delays, product shortages, and operational inefficiencies, all of which pose heightened risks to business continuity.
Industries most vulnerable to supply chain-related disruptions include:
- Electronics + Semiconductor: Reliance on imported microchips and components makes these sectors particularly sensitive to international trade policies.
- Pharmaceutical: Many raw materials and active pharmaceutical ingredients are sourced overseas, creating bottlenecks when tariffs are enforced.
- Automotive: Global sourcing of parts such as transmissions, steel, and electronics means automakers face both production delays and increased costs.
- Warehousing + Logistics: Changes in inventory flow caused by tariffs lead to increased warehousing needs and transportation complexity.
- Food + Beverage: Imported ingredients and packaging materials can be affected, disrupting production timelines.
- Construction: Building projects may be delayed due to shortages or increased prices of critical materials.
IMPACT ON PROPERTY VALUATIONS
Tariffs imposed on key construction materials — particularly those imported from neighboring trade partners such as Canada and Mexico — directly impact the cost of repairing or replacing property. This affects how insurers determine replacement cost valuations and, ultimately, policyholders’ reported values.
Materials currently seeing the most significant cost increases due to tariffs include:
- Steel + Aluminum: Commonly used in structural framing and roofing, these materials have seen cost surges that impact both residential and commercial builds.
- Lumber: With much of the lumber used in the U.S. coming from Canada, tariffs have elevated the price of framing and finishing wood, especially in residential construction.
- Piping + Ductwork: Critical for HVAC and plumbing systems, these materials are also subject to tariff-related price pressures.
These elevated material costs mean higher replacement values and greater potential for underinsurance if policies aren’t updated accordingly.
BUSINESS INCOME RISKS
Delays caused by supply chain disruptions can also lead to prolonged operational downtime, which impacts business income coverage. The longer a company is unable to operate at full capacity, the greater the revenue loss, and potentially, the higher the claim.
Moreover, some businesses attempt to mitigate tariff impacts by passing increased costs on to customers. This strategy may reduce consumer demand, erode purchasing power, and in aggregate, contribute to broader inflationary trends. Inflation, in turn, can distort reported values and complicate underwriting assumptions.
PREMIUM + INSURANCE MARKET IMPLICATIONS
Tariff-driven increases in material and operational costs could have a cascading effect on insurance premiums. As replacement costs rise, so do reported values, which form the basis of insured limits and pricing. Insurers may also raise premiums proactively to reflect the higher potential for loss payouts in a tariff-inflated environment.
Additional premium pressures arise from:
- Increased Reported Values: Reflecting the higher cost of materials and labor.
- Rising Claim Costs: Driven by longer business interruption periods and costlier repairs.
- Overall Inflation: Amplified by tariff policies, which ripple across industries and affect insurance industry economics.
BOTTOM LINE
While tariffs may appear as a tool of trade and economic policy, their impact extends deeply into the property insurance sector. Brokers, carriers, and insureds must stay attuned to global trade developments and adapt coverage strategies accordingly. Accurate valuation updates, contingency planning for supply chain disruptions, and ongoing discussions around inflationadjusted premiums are more important than ever in navigating evolving risk. Reach out to your CRC Specialty producer today to discuss how we can help ensure your clients are protected in today’s economic environment.
CONTRIBUTORS
- Daniela Mills is CRC Specialty’s National Property Practice Director. She has over two decades of industry experience, including over 10 years of senior property leadership expertise.
END NOTES
- The Economic Effects of President Trump’s Tariffs, Penn Wharton: University of Pennsylvania, April 2025. https://budgetmodel.wharton.upenn.edu/issues/2025/4/10/economic-effects-of-president-trumps-tariffs#:~:text=On%20April%202%2C%202025%2C%20President,thousands%20of%20different%20spending%20categories.&text=As%20shown%20in%20Table%201,will%20also%20reduce%2
- Trump Tariffs Live Updates, Yahoo Finance, May 14, 2025. https://finance.yahoo.com/news/live/trump-tariffs-live-updates-eu-offers-fresh-trade-deal-to-us-with-lobster-part-of-package-191201513.html