What to do when risks are shifted,

pricing is distorted, and markets

are forced to adapt in unpredictable ways

As tariffs hit, businesses renegotiate contracts. Sometimes

they do so quickly and, too often, without full risk review.

By Michael Wayne

Not so long ago, tariffs were background noise in most producers’ lives. Not any longer. Tariffs are at the forefront.

By design, they are blunt instruments that are meant to protect, punish, or rebalance. In practice, however, they behave more like pressure points. They shift risk, distort pricing, and force markets to adapt in unpredictable ways.

As we move deeper into 2026, the conversation is no longer just about what tariffs are in place. Now, the conversation is about how businesses are reacting to them. Supply chains are being challenged, circumvented, rerouted and reengineered in real time. Layer onto that the instability in the Middle East and West Asia, and you have a risk environment that is less about policy and more about behavioral response to disruption.

For property and casualty producers, that means the real exposures are not just tariff-driven. They are adaptation-driven.

Here are the top five tariff-driven risks reshaping property and casualty insurance in 2026, and where producers should focus.

Supply chain “workarounds” are creating hidden liability and property exposures. Tariffs rarely eliminate trade. Instead, they redirect it. Companies are already shifting sourcing strategies. They are moving manufacturing from one country to another. They are using intermediary countries to avoid direct tariff exposure and stockpiling materials in alternative jurisdictions, and they are splitting shipments or reclassifying goods.

Each of these workarounds introduces new risk layers and four major theoretical risk shifts:

• New, unvetted suppliers increase product liability exposure
• Different manufacturing standards create inconsistency in quality control
• Increased transit points raise inland marine and cargo loss frequency
• Warehousing in unfamiliar regions introduces property and theft risks
  
  

Instability in West Asia further complicates routing. Goods once moving efficiently through established corridors may now be rerouted through longer, less secure pathways.

Your client’s exposure is no longer where they used to operate. It’s where they’ve pivoted. Conduct mid-term exposure audits focused specifically on supply chain changes, not just renewal questionnaires.

Valuation becomes a moving target, which is a coverage problem. Tariffs don’t just raise prices. They destabilize them. When companies scramble to source alternative materials or suppliers, pricing becomes volatile. Add energy price swings tied to Middle East tensions, and the cost of goods becomes even harder to predict.

Theoretical risk shift here includes:

• Replacement cost estimates becoming outdated faster
• Business interruption valuations becoming unreliable
• Underinsurance risk increasing, especially on property schedules
• Coinsurance penalties becoming more likely

Energy is a foundational input. Instability in oil markets drives cost volatility across construction, manufacturing, and logistics. That amplifies valuation uncertainty.

Encourage clients to treat valuations as dynamic, not static. Consider quarterly or mid-year valuation check-ins for high-exposure accounts and push for margin buffers in business interruption calculations.

Contractual risk transfer is being quietly rewritten. As tariffs hit, businesses renegotiate contracts. Sometimes they do so quickly and, too often, without full risk review. Suppliers may shift responsibility for delays, cost overruns, or product failures. Buyers may demand new indemnification terms. Logistics providers may limit liability as routes become more complex.

A possible shift in risk could include:

• Indemnity clauses expanding beyond original underwriting assumptions
• Additional insured requirements changing mid-term
• Contractual liability exposures increasing without corresponding policy updates
• Coverage disputes arising over newly assumed obligations

Shipping disruptions and geopolitical uncertainty accelerate contract changes, especially in energy, construction, and manufacturing sectors tied to global trade. Do not wait for renewal to review contracts. Position yourself as part of the contract review loop and ensure insurance programs align with newly assumed obligations.

Regulatory arbitrage and gray-market activity increase compliance risk. When tariffs rise, so does the incentive to avoid them. Some companies respond by restructuring operations legitimately. Others push into gray areas such as misclassification of goods, indirect routing strategies, or partnerships with intermediaries that blur regulatory lines.

The resulting theoretical risk shift includes:

• Increased risk of regulatory penalties and fines
• Potential for coverage exclusions related to illegal or non-compliant activities
• D&O exposure for executives making aggressive trade decisions
• Reputational risk that can trigger downstream liability claims

Sanctions regimes tied to regional instability further complicate compliance. Companies navigating both tariffs and sanctions risk stepping into unintended violations.

This is where insurance meets governance. Producers should flag compliance risk as part of D&O and E&O conversations and ensure clients understand where coverage may not reach.

Macroeconomic volatility is driving correlated loss events. Tariffs and geopolitical instability don’t operate in isolation. Together, they contribute to broader economic volatility: inflation spikes, demand swings, and capital constraints.

Potential risk shift includes:

• Increased frequency of smaller, attritional claims tied to operational stress
• Higher severity on large losses due to inflated repair and replacement costs
• Greater likelihood of correlated losses across multiple insureds
• Reinsurance pressure as insurers face aggregation concerns

Energy market instability acts as a multiplier. Sudden price shocks ripple through transportation, agriculture, manufacturing, and construction simultaneously. Help clients think in terms of portfolio risk, not isolated exposures. Scenario modeling, even at a basic level, becomes a differentiator in advisory conversations.

Remember, the risk isn’t the tariff. It’s the reaction to it. Tariffs may set the stage, but behavior writes the script. The companies that adapt fastest are often the ones taking on new, untested risks. Add geopolitical instability in a region that anchors global energy and trade routes, and the result is a risk environment that is fluid, interconnected, and difficult to model using traditional methods.

For producers, the opportunity is clear:

• Ask better questions
• Look beyond the application
• Focus on operational changes, not just policy changes
  
  

The most important exposures aren’t the ones clients have always had. They’re the ones they’ve taken on in response to everything changing around them.

The author

Michael Wayne is an insurance- and risk management-focused freelance writer.