The short answer: recheck every value the property program hangs on — building and contents values on the statement of values, inventory at what it costs to replace today, the business interruption worksheet, cargo and project limits, and the coinsurance ratio those values produce. A policy limit does not adjust itself when costs move. If replacement costs have moved since those values were set, the program is priced and limited for a business that may no longer exist in that form.
Why this is a live question now
Lockton Canada made the point formally this month: in its first Canadian market update, released in October 2026 and reported by Insurance Business, it warned that trade disruption, inflation and supply-chain changes are shifting the values and exposures behind commercial programs faster than annual renewals can keep up.
“This report is intended to help leaders challenge outdated assumptions and ensure their insurance and risk strategies reflect the businesses they operate today — not the businesses they insured a year ago,” said Stéphane Lespérance, chief executive of Lockton Broker, ULC.
The trade backdrop in the Canadian update is specific. According to the report, the US declined on July 1 to extend the Canada-United States-Mexico Agreement (CUSMA) for a further 16-year term, putting it into annual reviews. In late August, the US imposed 50% tariffs on $27.6 billion of Canadian goods, and Canada responded on September 8 with counter-tariffs on the same value of US imports. The update names autos, steel, aluminum and lumber as already affected.
The peg is Canadian, but the mechanism is not. Any client whose replacement costs are exposed to tariffs, construction inflation, or a repriced supply chain has that exposure on either side of the border: the values on file age, their limits age with them, and nothing in the policy corrects the drift before a loss exposes it.
How insured values go stale between renewals
A statement of values is a snapshot. Building, contents, and equipment values are fixed at a point in time, usually from an appraisal or the client’s own figures. The policy then runs for a year on those numbers, however far costs travel.
Duties and inflation land inside replacement cost. Lockton’s update notes that inventory can cost more to replace once duties are paid, and flags inflation raising replacement costs generally. The same logic reaches the building itself when the tariffed goods — steel, aluminum, lumber — are what rebuilding is made of.
Business interruption values move with margins. A business interruption limit is built from the client’s own worksheet — revenue, margins, and the indemnity period. Lockton notes margins on tariffed products may have changed; when that input moves, the value built on it is stale as well.
What stale values do at claim time
Coinsurance converts a stale value into a reduced recovery. As IRMI’s glossary puts it, a coinsurance provision penalizes the insured’s loss recovery if the limit purchased is less than a specified percentage — commonly 80 percent — of the value of the insured property. Recovery is capped at the loss multiplied by the ratio of the limit carried to the limit required, less the deductible; the limit required is calculated from value on the date of loss, not the value on file at renewal.
The penalty applies to partial losses, not just total ones. Take a building that costs USD 2,000,000 to replace today, under an 80 percent coinsurance clause. The required limit is USD 1,600,000. If the client still carries USD 1,200,000 — a limit set when values were lower — the carried-to-required ratio is 0.75. A USD 400,000 partial loss then recovers USD 300,000 before the deductible, and USD 295,000 after a USD 5,000 deductible. The client absorbs USD 105,000 of a USD 400,000 loss, even though the loss never approached the policy limit.
An agreed value provision changes the mechanism, not the arithmetic of limits. IRMI notes an agreed value provision can avoid the possibility of a coinsurance penalty — the penalty mechanism is suspended while it is in force. But the limit still caps recovery, so a stale value still leaves a total loss short, and whether agreed value is in place or has expired belongs on the recheck list either way. The full mechanics of how limits, deductibles, and coinsurance interact at claim time are covered in our guide to insurance limits, deductibles, and coinsurance.
The mid-term recheck list
- Building values on the statement of values. Re-run each location’s replacement cost against current construction costs and compare it with the limit carried — the figure the coinsurance test uses at claim time.
- Business personal property and inventory. Revalue contents and stock at today’s replacement cost, including duties on imported goods. Inventory bought before a tariff change is replaced after it — at the new price.
- The business interruption worksheet. Rebuild it from current revenue and margins, and test the indemnity period against current equipment and material lead times. Lockton recommends reviewing the assumptions behind the cover, not just the limit.
- Cargo and stock throughput limits. If per-shipment cost has risen, a cargo limit set last year can cap a single shipment’s recovery below its replacement cost.
- Project insurance values. Projects in flight carry contract values set at signing, and Lockton lists project insurance among the items to review on material change — a project whose material costs were tariffed mid-build is exactly that case.
- The coinsurance ratio and agreed value status. Per location, divide the limit carried by the limit the clause requires at today’s values. Then confirm whether agreed value is in force and when it expires.
- Liability limits against US exposure. Lockton advises companies with US operations, customers, or sales to check liability limits against that exposure. A client whose cross-border sales grew mid-term no longer matches the profile the limit was set for.
- Supplier and customer concentrations behind the interruption cover. Lockton warns customers and suppliers may be under more financial strain than their latest statements suggest, and recommends reviewing concentrations, contracts, and customs compliance. A contingent interruption limit assumes the supplier base on file; quiet concentration on one tariffed source breaks that assumption.
When to run it — and why the timing is favorable
The trigger is a material change, not a date on the calendar. Lockton recommends reviewing property values, business interruption calculations, cargo limits, and project insurance whenever the business changes materially, not just at renewal.
Fixing values now is cheaper than fixing them in a hard market. Lockton reports insurance conditions remain favorable for many Canadian commercial buyers, though capacity and pricing vary by line, industry, and risk, and it urges buyers to spend that leverage on terms, exclusions, and limits rather than price alone. Aon’s latest Canadian market update points the same direction, with pricing flat to down for well-run risks heading into 2027. The companion review — forms and endorsements — is covered in our policy coverage analysis of ISO forms and endorsements.
The alternative is a claim-time discovery. A mid-term recheck costs a conversation and, where limits move, an endorsement. The gap otherwise announces itself after a loss, when the values can no longer be corrected and the coinsurance math runs on the numbers as they stand.
Frequently asked questions
Does a coinsurance penalty apply if the loss is smaller than the policy limit?
Yes — the penalty follows the ratio between the limit carried and the limit the clause requires, not whether the loss fits under the limit. In the example above, a USD 400,000 loss on a policy with a USD 1,200,000 limit still recovered only USD 295,000, because the limit carried was 75 percent of what the clause required.
What counts as a material change that should trigger a mid-term recheck?
Lockton ties the review to material change rather than the renewal date. In practice: a tariff change on the client’s inputs, a big move in construction or inventory costs, changed margins, new US operations or sales, or a construction project start.
Does an agreed value provision make the recheck unnecessary?
No. Agreed value removes the coinsurance penalty mechanism while it is in force (IRMI), but the limit still caps a total loss recovery — a stale limit is protected from the penalty and still exposed to the shortfall.