Ongoing uncertainty about the implementation date of U.S. tariffs on Canadian goods makes it more difficult for Canada’s risk and insurance professionals to prepare for the risk, but Aviva Canada started planning for the impact several weeks ago, Aviva Canada’s CEO Tracy Garrad told Canadian Underwriter Thursday.
Most recently, the White House is sending mixed signals about the Mar. 4 date to implement a 25% general tariff on all Canadian goods exported to the United States. This is to be followed by an additional 25% tariff on Canadian steel and aluminum scheduled for Mar. 12.
But while U.S. President Donald Trump keeps saying he plans to proceed the tariffs, the White House continues to send qualifying statements to the media such as, “as of this moment,” or “pending ongoing negotiations.” Canada’s fentanyl czar Kevin Brosseau and Public Safety Minister David McGuinty are visiting Washington, D.C., this week to make a final push for the Trump administration to drop tariffs.
“Like everyone else [in the Canadian P&C insurance industry], we are watching the situation very closely,” Garrad told CU during an earnings call announcing the company’s 2024 full-year results. “We actually stood up a multidisciplinary team in our Aviva Canada business several weeks ago to start analyzing the potential impacts, to start identifying them, and then actioning the levers we have available to pull.
“As you’d appreciate, it’s a complex situation. The only thing to say probably is that whatever estimates anybody puts on [the impact of tariffs] right now will be wildly inaccurate. The most you can do is start to plan.”
Related: Global risk: how Canada should handle Trump’s tariffs
If tariffs do finally arrive as Trump promises, Garrad says Aviva Canada plans to leverage its role within the global Aviva plc group to secure its supply chains if tariffs disrupt the insurer’s supply chain to the United States.
“We’re working closely with our supply chain partners because we’ve done the analysis around the percentage of our auto parts and replacement cars that come from the U.S. and, as you’d expect, it’s a substantial percentage,” Garrad told CU. “But [there are also] things like construction materials and property restoration materials [and] electrical appliances….
“We have a huge advantage in that we are part of the Aviva group and so we operate in other markets. We have supply chain in other markets, so we are really making the most of those relationships and having the conversations about switching some of our supply chain sourcing.”
In one way, discussions around supply chain sourcing are dovetailing with sustainability, which is another strategic priority for Aviva. For example, Garrad said, “we’re also looking at whether we can bring two important strands [of our corporate strategy] together and think about using recycled parts, which also plays to the sustainability agenda as well, of course.”
Garrad said in all of the discussion around tariffs, it’s important to remember that car parts aren’t the only things that increase the cost of auto insurers’ claims costs.
“We shouldn’t forget that in claims costs, particularly for automobile, a significant chunk of that cost is actually bodily injury. Physical damage is [just] one aspect, so we shouldn’t get too carried away with how dramatic the impacts [of tariffs] might be.”
One silver lining in the tariffs cloud is that Canada is finally accelerating its discussions about eliminating inter-provincial trade barriers and harmonizing provincial licensing and regulations, she said. “That has to be a good outcome, whether the tariffs hit or not.”
Editor’s Note: More coverage of Aviva Canada’s earnings call is to follow, including commentary on personal auto insurance and what’s needed to help P&C insurers handle bigger and more frequent natural catastrophes.
Featured image courtesy of iStock.com/luamduan
