U.S. Tariffs to Impact Home Insurance Premiums
Canadian homeowners could soon face higher premiums when renewing their home insurance policies. This is due to new U.S. tariffs that are increasing the cost of building materials and appliances, putting pressure on property and casualty insurers.
Cut lumber and stacked trees at an industrial sawmill in Elk Lake near Timmins, Canada, May 6, 2024. President Donald Trump’s tariffs have ignited a sense of economic anxiety and anger among Canadians about how they are being treated by their neighbor, ally and best customer. Ian Willms/The New York Times News Service
On Tuesday, U.S. President Donald Trump imposed across-the-board tariffs of 25 per cent on Canadian and Mexican imports. Separate tariffs on steel and aluminum went into effect on March 12. Canada responded promptly with its own tariffs on a number of U.S. imports.
Brett Weltman, a spokesperson for the Insurance Bureau of Canada, stated that the tariffs placed by Mr. Trump on building materials, such as aluminum, steel, and lumber, will raise costs for insurers for goods needed to replace and repair homes, cars, and businesses. “While we don’t yet have a precise picture of the scope of these effects, over time, tariffs will hurt consumers and families on both sides of the border,” he said in an e-mail.
Construction costs are a key factor in determining insurance premiums. In recent years, home insurance premiums have trended upward due to more frequent and severe natural disasters. As of January 2025, premiums across Canada increased by 5.28 per cent compared to the previous year – well above the general inflation rate of about 1.9 per cent, according to data from MyChoice, a Canadian digital insurance company.
Last year, the Canadian insurance industry paid out $8.5-billion in damages due to natural disasters, which is triple the costs recorded the year before. With the coming wildfire season approaching, the trade war could create another negative effect for homeowners who already face premium increases linked to climate change.
Bill Premdas, executive director of KPMG’s Canadian insurance practice, suggested that a prolonged tariff dispute with the U.S. could impact claims costs, as many resources used to rebuild and repair homes are subject to cross-border trade agreements. In addition to steel and aluminum, this could extend to appliances, furniture, and carpets that may be subject to retaliatory tariffs. “The impact of cost increases to service insurance claims would challenge profitability under current premium rates, and there could be inflationary pressures for insurers to increase premiums in response to the higher claims costs,” he noted in a KPMG report.
Mr. Premdas added that rising premiums could affect homeowners more quickly than car insurance, which usually requires regulatory approval for rate increases.
The insurance industry has not yet provided estimates for the cost increases that homeowners will face.
Mr. Weltman mentioned that initial analysis suggests tariffs “could impact all lines of property and casualty insurance,” with auto insurance “likely to be more impacted” because of tariffs on vehicles and parts. (On Wednesday, Mr. Trump extended a one-month tariff exemption to the Canadian auto sector.)
Chris Cornell, a partner and national leader at KPMG’s insurance practice, noted the uncertainty surrounding the trade war’s duration, along with the potential for layered tariffs, which could further affect premiums. “The layering of the tariffs is a significant issue. … So that uncertainty is just compounded,” he said.
IBC’s Mr. Weltman stated that Canadian insurers are trying to mitigate tariffs by seeking alternatives for American goods in their supply chains.
Intact Financial Corp., Canada’s largest property and casualty insurer, covers nearly three million homeowners in Canada. Spokesperson Caroline Audet explained that building materials account for one-third of total property insurance costs for homes and businesses. The other two-thirds include factors such as labor, temporary relocations, and business interruptions for commercial insurance. Approximately 25 per cent of materials are currently sourced from the U.S.
“That means that only approximately 8 per cent of total costs would be potentially exposed to the proposed tariffs, so we are confident that the overall impact on our business would be limited,” Ms. Audet said.
During a recent call, Intact chief executive Charles Brindamour told analysts that the company has been working with suppliers for the past month to ensure they have “as much Canadian content as possible.”
Patrick Barbeau, Intact’s chief operating officer, said that the remaining 75 per cent of materials used in property insurance are sourced and manufactured in Canada. “And we have opportunities to further reduce the usage of U.S.-manufactured goods at On Side and within the supply chain,” he added. (On Side is Intact’s in-house restoration company.)
Co-operators spokesperson Keren Adderley said that while some price adjustments may occur as early as 2025, the full effects may not be realized until next year, with forecasts indicating continued cost pressures in the coming years. “The insurance industry is bracing for the potential of increased claims costs across all property types, including commercial, farm, and homeowner policies as we expect the tariffs to drive up the cost of materials, labour, and services,” Ms. Adderley said in an e-mail.
IA Financial spokesperson Chantel Corbeil said the tariffs “can indeed influence” home insurance policies in Canada due to possible increases in material and goods costs. However, she noted that not all materials or goods will be affected by the tariffs, and labor costs are expected to remain stable.
