How Canada’s tariff response spells growth for construction coverages

Although tariffs can escalate insurers’ claims costs, the federal government’s response to tariffs has opened opportunities for specialty commercial brokers, particularly those in construction lines, sources tell CU.

The Liberal government campaigned on a promise to “double the pace of construction to almost 500,000 new homes a year.” It also promised to “inject $5 billion into a new Trade Diversification Corridor Fund, to build the infrastructure that will help diversify our trade partners, create good jobs and drive economic growth. This fund will accelerate nation-building projects at ports, railroads, inland terminals, airports, and highways.”

That’s an opportunity for the P&C industry, sources tell CU.

“Investing in healthcare, education, construction and real estate — those are very large parts of our economy, and parts of the insurance industry as a whole, that will create opportunities for underwriters,” says Elizabeth Diotte, senior vice president of professional and financial solutions (Canada) at Tokio Marine.

“How that develops into an opportunity in insurance is yet to be seen, but government spending and government infrastructure does tend to boost…opportunities in our space as well.”

Mike Brown, head of construction at Zurich in Canada, sees spin-off opportunities from the planned increase in construction projects.

“It’s one of those simple equations,” says Brown. “If you want to build 100,000 new houses, you’ve got you work out how many kids you have, because you will need schools. We’re going to need a cinema, and we’re going to need Big Box stores. We’re going to need a sewage plant. And then you’ve got to connect the arteries to everything else you need — the roads, the gas, the utilities.”

And this is all happening at a time when construction specialty rates in Canada are “really, really, really soft,” says Mathieu Brunet, president of Insurance Brokers Association of Canada and owner of MP2B Insurance. “For the big construction, the big infrastructure projects, and high-rise buildings, the rates are really going down….

“We see 30%, 40% or 50% [rate reduction] on some renewals, so it’s major, major down.”

Still, ‘soft’ is a relative term. Commercial carriers are still increasing rates, according to Applied Canada’s 2025 Q2 Commercial Rate Index.

But increases in the construction space have slowed to half of what they were two years ago, Applied reports. Average premium increases in construction were 7.24% in 2023 Q2, but they fell to 3.56% during the same quarter this year.

“Construction project insurance is beginning to experience a stabilization after a long, rocky hard market cycle,” says a report by WTW. “It is safe to say that this stabilization is largely due to the new norm of witnessing massive construction projects readily introduced into the insurance marketplace.”

It also depends on the type of construction. Soft markets aren’t materializing as much in the for-sale residential and coastal sectors, or for wood-frame building, most likely due to wildfire and flooding damage in Canada reaching record levels in 2024.

But “when we get into the four-wall stone, concrete, steel structures, life gets a little bit simpler,” says Brown. “The four-wall construction, large-scale construction, there is a huge market appetite for that. Prices are dropping, deductibles are dropping, cover is widening. It’s a softening market.

“We haven’t got to the pits of the mid-teens, when it was not just unsustainable, but it’s very challenging to write the business.”

Tariff-induced economic uncertainty could slow the construction pace, says Brown.

“We are seeing a slowdown of investment into the construction market,” he says. “The government is doing everything they can to drive it. We’re seeing the projects come, but they’re not coming at the rate we were expecting. And I think that’s the international finance community, they’re playing a little bit of a wait-and-see…

“I think the financial markets are actually driving the speed of things coming in. For example, the mega-projects, the carbon capture, the lithium battery plants — we’re seeing a pushback against electric vehicles because of the [tariff-related] tie-ups. It doesn’t mean they’re not going to get built, but investors are just saying, ‘Let’s slow down on our construction.’”

But the slower pace of building may in fact be pouring gasoline on the fire of a softening construction insurance market, says Marc Major, Marsh’s managing director and global placement leader for Canada.

“If tariffs are involved, we’re going to see a slowdown in construction,” he says. “Government-sponsored major infrastructure [projects] will continue to move forward. But home developments, multi-residential complexes, will slow.

“How that impacts the underwriting community is that they might even be more competitive, because for every construction project [that] comes their way, they’re going to try to get a piece of it.”

This article is excerpted from one that appeared in the August-September, 2025 print edition of Canadian Underwriter.