Tariffs and property insurance coverage considerations
The recent imposition of widespread tariffs is expected to disrupt supply chains, similar to challenges experienced during the COVID-19 pandemic. While the full impact is uncertain, these disruptions may significantly increase property insurance claims and should prompt policyholders to reevaluate limits, business interruption risk and customer / supplier extensions of coverage.
Although uncertainty is present, vigilant management of policy wording, prior to the occurrence of a claim, sets the stage for expected program performance. Building a best-in-class program requires expert knowledge in policy language, enabling proper evaluation of all terms and conditions, even those which otherwise seem non-descript. In these times, where tariffs are creating an environment of economic instability, understanding the nuanced definition of “replacement cost value” is very important. Some policies offering “replacement cost” provide:
Actual cash value shall apply if the property is not repaired, replaced or rebuilt within two years from the date of loss. The Insured may elect not to repair or replace the property lost, damaged or destroyed. Loss settlement may be elected on the lesser of repair or replacement cost basis if the proceeds of such loss settlement are expended on other capital expenditures related to the Insured’s operations within two years from the date of loss. As a condition of collecting under this item, such expenditure must be unplanned as of the date of the loss.
In normal conditions this could be fine, but when the supply chain is highly disrupted, and source materials are experiencing substantial delays, this language may leave the policyholder at a significant disadvantage. An enhanced version of the replacement cost provision, which is contained within the Willis property form, makes slight adjustments and ensures intended application of coverage regardless of delayed supply chains. It does not set a time limit for the completion of repairs and additionally provides:
In the event the Insured decides not to reassemble, rebuild, reclaim, reconstruct, repair, replace or restore the property lost, damaged or destroyed, the liability of the Insurer shall pay the Insured the actual cash value of the lost, damaged and/or destroyed property within 30 days after the Insured informs the Insurer … The Insured shall, at its option, within three (3) years from the date of payment by the Insurer of the actual cash value, expend the difference between the replacement cost and the paid actual cash value on any other capital expenditures related to the Insured’s operations … and shall recover those funds up to the full amount of the difference.
Economists have advised that tariffs will likely have inflationary pressure on construction costs, which consequently will impact programs that contain any margin clause or an “occurrence limit of liability endorsement.” Arguably, such clauses have no place on large commercial property risks and they are rarely worded in a way that allows for additional coverages within a property policy.
There is much ground to be gained by simply having a thorough understanding of all the component parts of a policy’s wording and how they relate to a particular business. Changing clauses or adding endorsements without regard to what is already there can unintentionally undermine how the mechanics of a policy form work. Therefore, encouraging open dialogue with both policyholders and underwriters to achieve greater clarity and consensus over intent is key.
| Title | File Type | File Size |
|---|---|---|
| Insurance Marketplace Realities 2025 Spring Update | 12.3 MB |
WTW hopes you found the general information provided here informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
Helen Campbell is a seasoned wordings insurance professional, bringing over 25 years of specialized experience in the property insurance sector. As Head of Property Wordings for Willis in North America, a WTW business, Helen plays a critical role in the development, analysis and customization of property insurance policies, ensuring clarity, precision and alignment with clients’ unique risk profiles.
Helen began her wordings career at Willis, where she spent a decade honing her niche skillset before relocating to Bermuda in 2007. There, she held senior wordings positions at Ironshore and Argo Group, deepening her knowledge of complex risk environments and international policy structures. She rejoined Willis in January 2025, bringing with her a wealth of technical insight and strategic acumen.
In her current role, Helen leads the refinement of policy language and coverage terms, delivering tailored insurance solutions that enhance transparency and mitigate ambiguity. Her work supports clients in navigating the nuances of property coverage with confidence and clarity.
