Entering 2025, the hospitality industry is facing a multifaceted landscape of risks — ranging from economic volatility and labour shortages to the rising threats of extreme weather and cyber vulnerabilities. These evolving pressures could significantly impact the industry’s stability both now and in the future, underscoring the importance of equipping your business to adapt and thrive. Taking a proactive and strategic approach towards managing your risks can help minimize exposure to these external factors and protect your bottom line.
Risk factors for the hospitality industry
Extreme weather
Last year was the costliest year in Canada’s history for natural disasters. Four events — the Jasper wildfires, floods in Ontario and Quebec, and the hailstorm in Calgary — caused more than $7 billion in insured losses. Insurers are continuing to enforce strict underwriting measures in response, particularly for businesses based in areas considered high-hazard and prone to extreme weather.
Rising costs and supply gaps
Despite signs of stabilizing inflation, the combination of increasing material costs, ongoing labour shortages, and supply chain delays continues to inflate repair and reconstruction costs and extend project timelines.
Emerging cyber threats
For businesses in all sectors throughout Canada, cyberattacks are becoming increasingly complex, frequent and widespread, fueled by the rise of AI and machine learning, Ransomware-as-a-Service, quantum computing, supply chain attacks, deepfake technology, geopolitical tensions and state-sponsored attacks. Read “Emerging cyber threats in 2025: Top risks for Canadian businesses” by my colleague Aliya Daya for an in-depth exploration of these growing threats and proactive risk management strategies to protect your business.
Record-breaking judgments
There has been a notable upward trend in nuclear verdicts (referring to judgments in civil litigation that are exceedingly high and unprecedented) in the US. In 2023 alone, there were 27 cases that resulted in awards of more than $100 million USD. Although this trend has yet to take hold in Canada, businesses — particularly those with US exposure — should consider maximizing their liability limits.
Key coverages for the hospitality industry
Beyond essentials like property insurance and commercial general liability, which are critical for any business with physical locations, there are coverage types that nearly every hospitality business should be carrying due to the nature of their operations:
Liquor liability coverage
Sometimes included in commercial general liability, this covers bodily injury and property damage to third parties as a result of selling or serving alcohol.
Innkeepers liability coverage
Covers loss or damage to the property of your guests.
Forcible ejection coverage
Covers bodily injury and property damage sustained by patrons during the process of being forcibly removed from the premises.
Equipment breakdown coverage
Covers the sudden and accidental breakdown of electrical and mechanical equipment, such as telephone systems, cash registers, boilers and compressors.
Food spoilage and consequential loss coverage
Covers the cost to replace food which has spoiled due to an equipment breakdown (i.e., coolers, fridges).
Employee dishonesty and crime coverage
Pays for financial losses resulting from employee fraud or theft.
Business interruption coverage
Pays for lost profits and continuing operating expenses in a total or partial operations shutdown due to a covered cause.
Cyber liability coverage
Pays for the costs that arise out of a data breach or cyberattack including notifying affected parties, data recovery, extortion, legal expenses and public relations.
Important risk management solutions for hospitality businesses
Get a professional appraisal
It is highly recommended to get a professional appraisal done in order to ensure you are insuring your commercial property based on current, accurate costs of replacement. The limit of your policy should cover the cost to repair or replace the damaged property to replicate the original design with materials of similar kind and quality, in accordance with current building bylaws, codes and regulations.
If you choose limits that fall below the full replacement value, you may incur a co-insurance penalty in the event of a claim. All commercial insurance policies are subject to a co-insurance clause, which requires that policyholders insure their property to a minimum value — usually 80%, 90% or 100% of the true value. When choosing a lesser percentage of coverage, you become a ‘co-insurer’ and agree to share any losses with the insurer.
Consider professional loss control services
At Acera Insurance, our in-house loss control specialists provide property inspections and risk assessments, identifying potential exposures that could lead to losses and recommendations for preventing or mitigating those risks. Engaging our experts helps demonstrate your commitment to risk management, positioning your business more favourably among insurers in order to better negotiate coverages, terms, conditions and pricing.
A softening market
The insurance market outlook is optimistic and promising for the year ahead. The insurance industry is experiencing a market softening, creating more favourable conditions by increasing capacity and putting downward pressure on rates. This shift presents opportunities for premium savings and enhanced coverage options, many of which may have been unavailable in recent years during hard market conditions. A soft market may open the doors for hospitality businesses to explore more specialized, customizable solutions as opposed to generic one-size-fits-all models.
Steve Noreen is a Senior Client Executive at Acera Insurance. Steve brings more than 13 years of insurance experience and specialized expertise in the hospitality and tourism industry. He serves as a board member for the Victoria branch of BC Restaurant and Foodservices Association and works closely with Destination Greater Victoria.
You can reach out to Steve at 250.519.2303 or steve.noreen@acera.ca.