As we move further into 2025, Canadian manufacturers are facing a rapidly evolving risk landscape. From digital threats to regulatory complexities, the manufacturing sector must adapt to new challenges to protect their operations, reputation, and bottom line. The following blog explores the key risk areas manufacturers need to prioritize and the insurance solutions available to mitigate these exposures.

Cyber Security: An Urgent Priority

Manufacturing has become a prime target for cyber-threat actors. With increased interconnectivity—especially through cloud services and the Internet of Things (IoT)—the potential for business interruption due to cyber breaches or extortion is greater than ever. Not only can cyber incidents lead to downtime, but they also pose risks of bodily injury or property damage, depending on the nature of the products and systems affected.

Manufacturers might not always be the end target; sometimes their infrastructure is used as a gateway to breach business partners. In these cases, manufacturers can be liable for third-party losses, including privacy breaches and operational downtime. A tailored cyber insurance policy is essential, as not all policies provide comprehensive coverage for these risks. In addition to financial protection, cyber insurance offers access to breach counsel and forensic experts, expediting response and recovery following an incident. Learn more about being prepared for Cyber Insurance – Staebler Insurance

Product Liability: Covering Bodily Injury and Property Damage

Standard product liability covers bodily injury or property damage resulting from the use or misuse of manufactured goods. Commercial General Liability (CGL) insurance is designed to address these losses. Additionally, product recall expense coverage can reimburse the costs associated with withdrawing defective or deficient products from the market.

Beyond the standard General Liability, manufacturers providing in-house design services may require Professional Liability (Errors & Omissions) insurance to cover economic losses arising from products not meeting specifications. Understanding the extent of your design services and potential exposures is critical when assessing your insurance needs.

Key Suppliers and Customers: Managing Business Interruption Risks

Supply chain resilience is more important than ever for many manufacturers. Reliance on a small number of key suppliers or customers exposes manufacturers to business interruption risks if those partners experience claims. Identifying transactions with significant partners is vital. Contingent Business Interruption insurance provides protection against unforeseen claims or disruptions caused by identified suppliers or customers.

Environmental Risks: Beyond Spills and Emissions

Manufacturers must maintain a clear view of hazardous materials used and/or produced in their processes. It’s important to recognize that environmental impacts can extend beyond typical spills to include things like: gases, air emissions, and noise pollution.

Site assessments (Level 1 and Level 2) are recommended early steps to identify any existing contaminants in and around work areas. From there, Manufacturers may need to trace back their origins to ensure they understand where any existing contaminants are emitting from and potential going to (e.g. are contaminates making their way to water sources, etc.).

Don’t forget that hazardous goods in transit also pose risks of spills or contamination at third-party locations. Environmental Impairment Liability policies can be structured to address these exposures, with broader policies providing flexibility for claim initiation and clean-up, rather than requiring authority orders (e.g. from the Ministry of the Environment). A thorough understanding of your environmental risks, including hazardous materials used or produced, is an important first step to ensuring you have the right coverage. Working with an insurance broker to match these risks to the appropriate insurance policy is an important step for manufacturers to protect their business.

Transportation: Clarifying Ownership and Liability

Ownership of goods in transit can be complex. Manufacturers should clearly define responsibilities with customers and suppliers. Common carriers often have limited liability based on product weight, which may not fully cover potential losses.

Even when using their own fleets, manufacturers need cargo insurance to protect goods en route. Whether transporting yourself or through a third party, holding your own cargo insurance streamlines the claims process and ensures control over compensation, rather than relying on third-party partners and their insurers to compensate you for losses.

Directors & Officers (D&O) and Employment Practices Insurance

Economic uncertainty, inflation, and higher interest rates have created additional challenges for business leaders. Directors and officers can be sued for decisions made in good faith, and operational pressures have increased exposures to adverse outcomes. The end of pandemic support programs has led to a spike in business bankruptcies, with Canadian insolvency statistics reaching a 15-year high in Q3 2024. (Source: Insolvency Statistics in Canada — January 2025)

On the Employment Practices side, accusations of wrongful dismissal, harassment, and discrimination remain concerns for manufacturers. Economic uncertain can extend into hiring and/or termination practice changes, potentially putting manufacturing operations at an even greater exposure to claims.

Proper Directors & Officers coverage, including Employment Practices Liability, protects both the business and its leadership from these potential claims. For a deeper dive, see our article: Why D&O Insurance is Critical for Businesses – Staebler Insurance

Trade Regulation and Tax Liability: Staying Compliant

Exporting products abroad requires sensitivity to controlled goods regulations, such as Export Control Lists (ECL), and Controlled Goods Programs (CGP). Manufacturers must stay updated on Canadian sanctions and avoid transactions with sanctioned parties.

In addition to sanctions, charging correct sales taxes across provinces and countries is essential to avoid attracting outstanding liabilities. Similarly, tariffs remain a dynamic issue, impacting both finished products and component materials.
Intellectual Property (IP) Infringement Risks

Manufacturing processes often involve proprietary trade secrets and technical know-how. Manufacturers must ensure their practices do not infringe on existing IP. Intellectual Property Expense Reimbursement insurance can help cover defence costs in the event of alleged or actual infringements.

Mergers & Acquisitions (M&A): Navigating the Complexities

M&A activity is common in the manufacturing sector, but outstanding risks can jeopardize deals or reduce business value. Manufacturers who have ensured robust risk transfer through proper insurance coverage maximizes their value to potential buyers. Buyers should conduct thorough due diligence to uncover latent risks in target companies.

Mergers & Acquisitions Insurance can protect both parties from financial losses and help resolve disagreements before they become deal-breakers. Read more in our article: Mergers & Acquisitions: What You Need to Know – Staebler Insurance

Proactive Risk Management is Key

Manufacturers in Canada face an increasingly complex risk environment in 2025 and beyond. By understanding potential exposures and working with trusted advisors to secure tailored insurance solutions, businesses can safeguard their operations, enhance resilience, and position themselves for long-term success.

A Staebler Insurance Commercial is a partner that can help with proactive risk management and personalized insurance solutions to protect your organization. Reach out today to get started: Contact An Insurance Broker – Staebler Insurance.

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