Navigating tariff-driven cost increases in property insurance
The global trade landscape has undergone significant changes following the enactment of new American tariffs, affecting steel and other industrial goods. These shifts have resulted in unforeseen cost increases in the rebuilding and replacement of damaged property, posing a financial challenge for businesses reliant on insured property. To mitigate these risks, Willis, a WTW business, introduces the "Tariff Guard Endorsement" — a strategic enhancement to commercial property coverage for natural resources companies.
Understanding the tariff impact
With tariffs escalating on essential materials such as steel, aluminum, and other industrial commodities, replacement costs for insured property are expected to surge. Companies within the natural resource sector, particularly those dependent on international trade, are now facing unpredictable budgetary constraints when dealing with property losses. As tariffs fluctuate, so does the cost of rebuilding, leading to gaps in insurance coverage that can burden businesses financially.
Tariff Guard endorsement solution
Recognizing the volatility introduced by tariff-driven cost increases, Willis has crafted an endorsement that addresses this challenge directly. This commercial property coverage enhancement provides additional financial protection for insured property susceptible to increased replacement costs due to governmental trade barriers. However, it's important to note that the inclusion of this endorsement in a policy is subject to the carrier's approval.
Key provisions of the endorsement
- Expanded coverage: Policyholders receive an increased 20% limit above the standard insurance allocation for goods, materials, stock-in-trade, and merchandise affected by tariff-related price surges.
- Eligibility: Coverage applies when the increased costs are directly attributable to tariffs enacted or heightened within 24 months of a loss.
- Documentation requirement: Insured entities must present reasonable evidence of the tariff-related cost increase at the time of loss to access additional benefits.
- Limitations and exclusions: The endorsement applies solely to tariff-driven cost fluctuations and doesn’t extend to property not otherwise covered under the policy.
- Interaction with other insurance: If other insurance policies cover the same loss, this endorsement applies in excess of that coverage unless specifically designated as the primary policy.
Implications for natural resource clients
For clients operating in resource-heavy industries, the financial effects of tariff-induced price volatility can be significant. Companies that manufacture, process, or distribute goods reliant on imported raw materials will especially benefit from this added safeguard. With the endorsement in place, businesses gain enhanced certainty in their coverage — ensuring they have the funds to restore operations efficiently despite evolving trade dynamics. However, it's important to note that the inclusion of this endorsement in a policy is subject to the carrier's approval.
Conclusion
Tariff-driven cost increases present an evolving challenge in the realm of commercial property insurance. By integrating the Supplemental Tariff Endorsement into existing policies, Willis empowers clients to navigate these uncertainties with greater financial security. As trade policies shift, proactive risk management is key to maintaining business continuity and financial resilience.
For more information on how this endorsement can fortify your coverage, contact us.
Disclaimer
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).
