Resources & Insights

USMCA Passage May Help Ease Construction Industry Premiums

January 22, 2020

Scott Carlson,
President, Construction Practice

The U.S. construction industry relies on tens of billions of dollars in building materials sourced from Mexico and Canada. That’s why anyone in the business should be cheering the passage of the revamped United States-Mexico-Canada agreement, or USMCA.

With its passage in the Senate earlier this month, which came after overwhelming bipartisan support in the House, the USMCA now has the real potential to boost the construction sector while reducing price volatility for building materials.

That, in turn, could have the effect of calming commercial insurance rates for construction companies. Just how much of an impact is tough to say, given that rates are based on myriad factors, including a company’s safety record. But premiums over the past few years have definitely been influenced by rising materials costs, a trend fueled by higher tariffs.

Consider, for example, the hefty tariffs applied to Canadian lumber. Prices rose 25 percent, and lumber by the fall of 2018 cost 60 percent more than it did two years earlier.

Trade policy, in short, influences construction and insurance costs and so the easing of trade tensions represented by passage of the USMCA is good news for all concerned.

The trade deal was hammered out in late 2019 by the three countries as a modernization of the North American free trade agreement. Mexico is already the largest trading partner of the United States, followed by Canada, but the USMCA is expected to only help deepen the relationship between the three.

Beyond stabilizing material costs, the USMCA also promises to reform Mexican labor laws. That’s not necessarily helpful in terms of lowering insurance premiums, because labor shortages drive up the cost of a construction project. And under the USMCA, Mexican wages should rise, perhaps discouraging Mexican laborers from crossing the border for jobs in the U.S.

Regardless, the USMCA’s passage erases a good deal of uncertainty that has hung over the construction business and certainly won’t hurt when underwriters are weighing risks when either issuing a new policy or renewing one.

Scott Carlson is the president of CCIG’s construction practice. Reach him at or 720-212-2040.

CCIG is a Denver-area insurance, employee benefits and surety brokerage with clients nationwide. We do more than make sure you have the right policy. We help you manage your long-term cost of insurance with our risk and claims management expertise and a commitment to service excellence.

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