Canadian construction firms face a growing risk of faulty work and liability claims as uncertainty around the Canada‑United States‑Mexico Agreement (CUSMA) squeezes margins and pressures project timelines, according to a professional risk specialist.
Alex Ilkos (pictured), a client executive in the professional services unit at Purves Redmond Limited, said CUSMA talks are unlikely to directly change how insurance policies are written. Instead, they alter the financial and operating environment in ways that can cascade into higher loss activity.
“I don’t really think CUSMA changes coverage directly,” he said. “It more changes the underlying risk environment.”
Ilkos said three factors dominate the insurance implications for businesses exposed to cross‑border trade: margin compression, revenue volatility and day‑to‑day working capital strength. If tariffs or trade barriers raise input costs and disrupt sales channels, companies will have less room to absorb shocks and more incentive to push costs and timelines down the supply chain.
Ilkos said margin compression affects the insurance environment as a whole, adding that where companies source their products, whether they face new tariffs, and whether they can continue to sell into the US market will all feed into swings in revenue and cashflow.
While manufacturing is likely to be the most directly exposed sector, Ilkos said his own focus is on construction, where he sees clearer links between financial pressure and insurable loss.
“These negotiations are just going to put everyone in the construction world (on any project) … in a tough situation.”
As steel, concrete, fixtures and other building inputs become more expensive or harder to source, Ilkos said owners and general contractors are likely to look for savings elsewhere. That can mean tighter fees for engineers and consultants and compressed schedules for trades.
Ilkos warned that delays and cancellations are likely as costs rise, and that budget overruns could push contractors to cut corners — ultimately resulting in faulty work and general liability claims.
He said pressure tends to move down a chain of parties, from owners to general contractors to subcontractors and specialist trades. By the time it reaches individual firms on site, it can manifest as subtle changes in how work is planned and executed.
“They want their engineers to charge less. They want their electrical contractors to work faster and more efficiently,” he said. “Next thing you know, that’s where you start finding errors… that’s where you’re going to have general liability claims, which is more like your direct exposure.”
The dynamic is reinforced, he noted, by balance‑sheet stress. As margins tighten and working capital comes under strain, the solvency profile of some firms may weaken. That, in turn, can influence how aggressively they respond to demands from upstream counterparties.
Ilkos said that once revenue comes under pressure and insolvency risk grows, companies are increasingly likely to cut corners – and with it, take on larger risks.
He said the discussion around CUSMA frequently focuses on headline issues, such as tariffs on steel and aluminum or high‑level export and import figures, but misses how those pressures can change the risk profile of individual projects.
“Everyone talks about the obvious, the importing, exporting, is it going to cost more,” he said. “But I think the work that is then affected because of that, the next step, isn’t necessarily discussed as much.”
Those downstream effects, he said, are likely to show up over time in the form of defective work, remediation costs and liability claims for bodily injury or property damage arising from construction errors. The connection between policy negotiations and a cracked façade, a failed system or a structural issue is indirect but real.
Ilkos also pointed to the sensitivity of the topic in client conversations. While underwriters and brokers may see a clear line from financial stress to riskier behaviour, acknowledging that explicitly can be difficult in a commercial relationship.
“It’s a touchy subject because we need to have open conversations with clients about how these pressures will affect the actual work they perform, for the worse,” he said.
He added that the behavioural aspect of the risk makes it harder to quantify and less likely to be openly discussed, even as it becomes more relevant in an environment shaped by trade uncertainty and cost pressures.
“Nobody is ever going to admit that they’re cutting corners,” he said. “Nobody is going to actively talk about it. It just happens slowly.”
