Construction Insurance: What’s Softening, What Isn’t
- Cottingham & Butler
- 1 day ago
- 12 min read
Written by Emily Glanz, VP Sales - Risk Management for the September/October 2025 issue of CFMA Building Profits.
The construction risk landscape in 2025 and heading into 2026 is anything but static. Between billion-dollar storms, evolving underwriting appetites, and the rise of AI-powered everything, it’s proving to be a wild ride.
This article translates insurance “legalese” into practical language to help leaders in construction navigate what’s happening and prepare for what’s next.
Whether you’re a contractor trying to make sense of your builder’s risk renewal, a broker looking to see how others are viewing the market, or an underwriter wondering if you’re the only one still using a fax machine (you’re not), this article is for you.
PROPERTY INSURANCE
Commercial Property
In 2025, the U.S. commercial property and builder’s risk insurance market is balancing volatility from climate-driven events with emerging construction innovation. Those forces have infused carrier optimism and a renewed willingness to deploy capacity and capital.
Early in 2024, the property market began to show clearer signs of a shift, marked by rate relief and increased carrier appetite. However, weather-related events have not slowed, nor have they become less costly.
According to Gallagher Re and reported by the Insurance Information Institute, global catastrophe losses at the end of 2024 totaled at least $402 billion, with 37.6% of those losses insured.1 In the first half of 2025 alone, the U.S. reported over $100 billion in insured losses, with $19 billion driven primarily by convective storms and the Southern California wildfire.2
Despite these challenges, the property market continues to show signs of rate relief and stabilization. Capacity is expanding, leading to increased competition and resulting in decreased rates, lower deductibles, and broader coverage, particularly for well-managed risks. Even historically difficult to insure properties in coastal regions have seen rate softening in 2025. For more, see Exhibit 1.
Insurers are increasingly managing their exposure through quota share structures. This approach provides a buffer for both insureds and reinsurers. However, properties with prior losses or significant catastrophic exposure continue to face elevated rates and tighter underwriting terms.
While the broader commercial property insurance market is showing signs of softening, contractors may not experience the same level of benefit. For the most part, due to lower total insured values, contractors have been relatively insulated from the harshest impacts of the hard market cycle.
Property insurance often represents a smaller portion of their total cost of risk, which has helped shield them from steep premium increases. However, this also presents a catch-22: with lower premiums and modest property schedules, contractors have less leverage to negotiate significant rate reductions, even in a softening market.
Additionally, many admitted carriers are still retroactively adjusting property valuations to account for inflationary pressures, which can offset potential savings.
As a result, contractors should temper expectations for substantial premium decreases, especially when their property spend is minimal relative to their overall risk profile.
Builder’s Risk
Specific to the builder’s risk property market, Amwins3 notes that projects classified as “difficult to place” fall into three primary categories: large wood frame construction, catastrophe-exposed construction, and catastrophe-exposed wood frame construction.
Encouragingly, broader property market trends are beginning to influence these more complex placements, though underwriting scrutiny remains high.
Carriers are prioritizing high-quality submissions that include complete and consistent data, clear jobsite planning and design, and strong security protocols throughout the construction process. In short, complete, consistent, and timely data up front enables efficient underwriting and drives more favorable results.
Specific to risk engineering and underwriting, technology is playing an increasingly important role in risk assessment. Insureds that implement water flow detection systems, AI-powered security, and damage mitigation tools are viewed more favorably by underwriters. Water losses have continued to be a major driver in four-wall construction, so proactive measures and technology advancements can certainly yield a favorable underwriting result.4
Meanwhile, project starts have slowed, particularly in the multifamily sector, as developers respond to tighter margins and macroeconomic headwinds. Building material sustainability is also gaining momentum as a strategic priority.
Insurers are developing specialized products that support green building initiatives, including climate-resilient infrastructures and environmental-, social-, and governance-aligned construction practices. Using these methods can reduce absolute property losses in catastrophic events.
From an insurance perspective, innovative solutions such as parametric insurance and alternative risk transfer mechanisms are gaining traction, offering faster recovery options and potentially providing new sources of capital for high-risk projects.
Looking ahead, the market is expected to remain competitive, though caution is warranted. While rate relief may continue for favorable risks, the frequency and severity of natural catastrophes will continue to influence underwriting decisions.
The long-term trajectory of rate relief amid uncontrollable catastrophic losses remains uncertain. Still, many in the industry recognize that current market conditions, while still volatile, present a window of opportunity.
COMMERCIAL CASUALTY
Auto
The commercial auto liability insurance market in 2025 remains one of the most chronically challenging lines within property and casualty.
According to the Council of Insurance Agents & Brokers (CIAB), auto liability posted an average rate increase of 10.4% in Q1 2025, the highest among all major property and casualty lines.5 This marks 55 consecutive quarters of rate hikes,6 which emphasizes how imbalanced the market is.
Despite sustained double-digit rate increases, carriers continue to struggle with losses that consistently outpace premium growth. This leaves little room for relief, especially for insureds with large fleets, poor loss histories, or exposures tied to “gray fleet” operations.
“Gray fleet” refers to vehicles not owned by a company but used for business purposes, typically employee-owned vehicles driven for work-related tasks. While these vehicles may not appear on a company’s balance sheet, they represent a significant liability exposure. As gray fleet usage grows, insurers are placing greater emphasis on how organizations manage this risk, including:
Collecting insurance declarations from employee-owned vehicles
Running motor vehicle records
Implementing driver qualification standards
Enforcing minimum age requirements (often excluding drivers under 25)
Requiring 1-3 years of clean driving history
One of the most alarming trends in commercial auto is the escalation of jury awards. The median commercial auto liability verdict has surged to $23.8 million, according to Captives Insure.7
Nuclear and thermonuclear verdicts are also damaging to umbrella and excess liability layers, which are often triggered by catastrophic auto claims.
Several interrelated factors continue to fuel the challenges in this line:
Litigation and social inflation: The rise of third-party litigation funding — an industry expected to be worth $30 billion by 20288 — has extended the duration and cost of legal battles. Plaintiff attorneys increasingly use psychological tactics, such as the reptilian theory, to ultimately cloud a juror’s judgement with emotional distress by casting the defendant as a threat to society.
Distracted driving: Drivers aged 26-36 account for nearly half of all distracted driving incidents.9 According to the National Highway Traffic Safety Administration, taking your eyes off the road for just five seconds at 55 mph is equivalent to driving the length of a football field blindfolded.10 These behaviors are linked to 108% higher loss costs.11
Driver shortages: The ongoing shortage of qualified commercial drivers has led to increased reliance on less experienced operators, contributing to higher accident frequency and severity.
Vehicle complexity and repair costs: Modern vehicles equipped with advanced driver-assistance systems are significantly more expensive to repair. Supply chain disruptions and labor shortages have only exacerbated these costs.
In response to these pressures, insurers are tightening underwriting standards, raising attachment points on liability towers, and adopting more conservative reserving practices.
Insurers are increasingly turning to telematics, AI-driven underwriting, and predictive analytics to better assess and price risk. Many are explicitly excluding named drivers, requiring stricter driver qualification criteria and years of experience, and requiring insureds to frequently review their fleet safety protocols.
“Best in Class contractors are taking a proactive stance on auto liability,” says TJ Greenwood of Safety Management Services Company, who works closely with members of the CSIL construction captive. “We’re seeing three key strategies make a real difference: First, leveraging technology (cameras, GPS, speed tracking, and telematics) to create accountability and unlock documentation that may be critical when incidents occur. Second, implementing a strong driver qualification program that mirrors the rigor of CDL standards but applies to every company driver. And third, reassessing personal use of company vehicles. What was once considered a company “perk” necessitates higher scrutiny, especially when employees are performing personal tasks in a vehicle bearing the company logo.”
“The benefit of working within a loss-sensitive program, like a captive, is that members can go even further by partnering with their insurance carriers to unlock next level claim strategies. First call settlement programs can resolve qualifying claims within hours, often before attorney involvement. This may allow for a dramatic reduction in indemnity and expense. Additionally, commercial auto-focused predictive analytics identify high-severity claims early and provide rapid resolution protocol that should reduce settlements on flagged claims.”
While other lines of insurance are beginning to show signs of softening, commercial auto remains firmly in a hard market cycle. The outlook for 2025 suggests continued rate pressure, particularly for accounts with large fleets, poor loss experience, or operations in high-risk jurisdictions.
General Liability
While the general liability (GL) insurance market remains relatively stable compared to auto liability, contractors face a more nuanced reality. According to CIAB, GL premiums rose by an average of 4.2% in Q1 2025,12 reflecting moderate firming driven largely by social inflation and increased loss severity across industries.
For most insureds, this translates to manageable increases, unless they operate in high-risk sectors or have adverse loss histories.
For contractors, however, the story is more layered. The construction industry is experiencing a surge in dispute frequency, complexity, and value, which directly impacts how underwriters assess GL exposure.
According to the 2024 Construction Disputes Report from Arcadis, the average value of construction disputes in North America rose to $43 million in 2023 (Exhibit 2). The average time to resolve disputes also increased to 14.4 months, underscoring the growing complexity of claims.13
The most common causes of disputes — errors or omissions in contract documents and failure to understand or comply with contractual obligations — are directly tied to GL exposures. These issues often lead to bodily injury or property damage claims, especially when project delays, scope changes, or quality issues arise.
This is affecting insurance programs because contractors are increasingly being scrutinized not just for their safety records, but for how they manage contractual risk, documentation, and dispute resolution. Consequently, underwriters are paying closer attention to:
Contract language and risk transfer mechanisms
Claims history involving subcontractor disputes or third-party injuries
Use of digital tools for documentation and project controls
The Arcadis report emphasizes that contract and specification reviews and risk management are the top two techniques for avoiding disputes.14 These practices are also critical in demonstrating to insurers that a contractor is a lower risk GL exposure.
As an outlook for contractors, it is reasonable to expect that while GL may not be experiencing the same volatility as auto or umbrella, contractors should not assume stability means limited information will suffice.
The intersection of legal risk, project complexity, and dispute trends means that GL programs must be proactively managed.
Umbrella & Excess Liability
In 2025, the umbrella and excess liability market continues to feel the compounding effects of rising severity in underlying lines, particularly auto liability.
According to CIAB, umbrella premiums rose by an average of 9.5% in Q1 2025,15 reflecting ongoing pressure from catastrophic verdicts and limited carrier appetite for high-limit placements (Exhibit 3).
For contractors, this is especially problematic. Large fleets, subcontractor-heavy operations, and complex project scopes increase the likelihood of high-severity claims that pierce primary layers. As a result, underwriters are not only raising rates but also reducing available capacity, particularly for accounts with transportation exposure or adverse loss histories.
As a result, contractors must now approach umbrella placements with the same submission standard that is applied to primary lines. Insurers are scrutinizing driver qualification standards, gray fleet controls, and contractual indemnity language to assess how well risk is managed across the organization.
Additionally, the rise in construction defect disputes adds another layer of concern, as bodily injury or property damage claims stemming from project delays or jobsite incidents can quickly escalate into excess limits.
For contractors, the key to navigating this environment lies in proactive risk management, tight documentation, and early engagement with brokers and carriers to structure programs that reflect both the true exposures of their operations with the market’s evolving expectations.
Workers’ Comp
Workers’ comp continues to stand out as one of the most resilient and consistently performing lines in the commercial insurance market.
In 2025, average rate changes have ranged from modest decreases to low-single-digit increases, with the CIAB Q1 2025 report noting an average rate reduction of -2.6%.16 This stability offers contractors a degree of predictability and relief amid the volatility seen in auto, umbrella, and GL lines.
Strong underwriting results and favorable loss ratios have helped maintain this trend, making workers’ comp a line of opportunity where proactive safety and claims management can still yield tangible financial benefits.
However, the construction industry’s unique risk profile can wrinkle this picture. According to the Claims and Litigation Management Alliance, workers’ comp accounts for over 70% of all claims in construction, with nearly $11.4 billion in annual losses tied to serious nonfatal injuries.
The top causes of falls, overexertion, and being struck by objects, are compounded by mental health challenges, including stress, fatigue, and substance misuse. These causes not only affect claim frequency and severity but also contribute to longer recovery times and higher total costs of risk.
For contractors, the emphasis should be on comprehensive safety programs, early intervention, and strong and engaged claims handling to improve outcomes and control costs in an otherwise favorable pricing environment.17
ANCILLARY LINES
Contractor Professional & Pollution Liability
Commonly viewed as an unusual pairing, contractor professional and pollution liability continues to be packaged together by insurers. A key driver is the low frequency of claims experienced on both lines of coverage.
Additionally, combining the two coverages and sharing the policy aggregate limit of liability provides notable premium savings to the insured compared with purchasing separate towers of coverage. In 2025-26, many contractors are reevaluating their approach, opting for higher limits and increased self-insured retentions to better prepare for catastrophic exposures.
The most prolific type of pollution claim continues to be centered around indoor air, particularly mold. As such, some carriers may assign a claims-made trigger for mold or apply an increased retention to this exposure.
Exclusions related to per- and polyfluoroalkyl substances and perfluorooctanoic acid are still relatively rare within the pollution market but are a trend that will be closely monitored in the future.
On the professional side, claims associated with construction management continue to be the leading source of professional liability claims. Carriers are still willing to provide the first-party coverages of rectification and protective indemnity at full policy limits, although this trend may change with the growth of high-value rectification claims.
Finally, particularly for subcontractors, a notable enhancement is the increase of carriers willing to provide affirmative coverage for faulty work (often termed “faulty workmanship” in policy language). Coverage is either included or added via endorsement, but no two carrier forms are alike.
Coverage commonly includes a third-party trigger that will respond to allegations of property damage originating from work performed by the insured. This trend began in 2024 and continues to be under the watchful eye in 2025 and into 2026.
Subcontractor Default Insurance
In the U.S. market, subcontractor default insurance rates remain stable despite a noticeable uptick in defaults among small- to mid-sized subcontractors.
Increased competition, driven by new insurers and capacity deployment, has helped maintain flat pricing while improving coverage terms.
Additionally, submissions have increased as GCs continue to enter the market as their revenues increase and awareness of this coverage opportunity grows.
Management
Directors and officers and employment practices liability continue to face elevated claims frequency and severity; driven by wage and hour litigation, social inflation, and a chronically litigious environment.18
Chris Bertola, Senior Vice President of RT ProExec, highlights a key driver: “Private Attorneys General Act (PAGA) claims in Southern California have seen a significant increase as of late. This rise is primarily attributed to the law enabling employees to file lawsuits on behalf of themselves and others for labor code violations. Employers in Southern California face heightened scrutiny and potential financial liabilities due to these claims.”
While the market shows signs of rate stabilization, with a notable drop in increases compared to the peak in 2020,19 underwriting remains cautious, especially in litigious states like California, New York, and Florida, with emerging difficulty in Illinois and Texas.20
RT ProExec adds that AI-related risks are reshaping management-liability exposures, prompting carriers to reassess coverage terms and exclusions.21 Overall, this may impact contractors adopting digital tools and automation.
Cyber
As cyberattacks grow more frequent and sophisticated, stronger security frameworks have helped keep claims costs manageable. This has led to mostly flat renewals or modest rate reductions for many insureds.
Beyond ransomware attacks, according to Coalition, 60% of cyber claims involve social engineering schemes like business email compromise and funds transfer fraud, where attackers intercept payment requests from subcontractors, vendors, or owners.22 These types of losses often come with sublimits and varying coverage terms.
Looking ahead, cyber insurers are expected to tighten underwriting further by requiring continued evidence of ransomware preparedness and staying alert to emerging attack vectors.
CONCLUSION
If you’ve made it this far, then you deserve credit, or maybe just another cup of coffee.
What this year’s market has shown is that volatility isn’t going away, but neither is innovation. From climate-driven property losses to litigation trends and underwriting resets, the landscape is demanding more from all of us: more information, more collaboration, and more intention in how risk is approached.
Now is the time to reaffirm the partnerships that help you see around corners, revisit your risk strategy with fresh eyes, and stay curious, because the Best-in- Class risks aren’t just built on strong foundations, they’re built on shared insight, proactive planning, and a willingness to adapt.
EMILY GLANZ is a Vice President who specializes in Construction Risk Management at Cottingham & Butler (cottinghambutler.com) in Dubuque, IA, with nearly 15 years of experience in consulting middle-market construction companies. Emily actively participates in industry associations and is a frequent speaker for the International Risk Management Institute (IRMI) as well as regional CFMA conferences, and is appointed to the “Big I” Ask An Expert Panel, where she advises other agents on coverage questions. Emily has also authored risk management blogs and articles for industry publications. She can be reached at eglanz@cottinghambutler.com.
Endnotes
8. insuranceindustryblog.iii.org/reining-in-third-party-litigation-funding-gains-traction-nationwide.
14. Ibid.
16. Ibid.
19. ciab.com/resources/news-releasemost-lines-of-business-softening-litigationin-fluencing-others-the-councils-q1-2025-p-c-market-survey-shows.
20. blog.ryanspecialty.com/april-2025-u.s.-professional-executive-liability-insurance-market-report.
Copyright © 2025 by the Construction Financial Management Association (CEMA). All rights reserved. This article first appeared in CFMA Building Profits (a member-only benefit) and is reprinted with permission.