State of the Construction Insurance Market

The 2025 Market

Appetite in the UK construction insurance market has remained consistent over the last 12 months, although there has been a shift toward the middle-tier of the market, as some carriers seek to increase their market share in this segment. Pricing remains stable despite sustained higher interest rates and moderate inflation prevailing largely due to the competitive environment. However, without an influx of new entrants into the market, we are unlikely to observe a significant softening of rates over the next 12 months as insurers focus on client retention and risk quality to maintain profitability.

Managing General Agents (MGA) remain active and continue to play an important role in providing solutions for smaller, high frequency risks, along with longer-term business such as Latent Defects insurance. A recent surge in activity and the deployment of additional capacity will benefit some construction insurance buyers.

For larger, more complex risks, coverage continues to be driven by the required insurance capacity. Lead insurers are generally offering smaller lead lines than they have historically. This means a larger number of insurers are required to secure 100% of the placement, which also creates additional time for concluding any complex placements with multiple carriers.

Annual policies have had several years of improved market conditions and many project-specific policies containing broader, more generous legacy terms and conditions have generally reached handover. This means insurers are now focusing more on risk selection and maintaining underwriting discipline to sustain portfolio performance. As many UK construction insurers are active in international property and construction markets, their underwriting appetite and results are not solely influenced by the UK construction sector.

However, the following factors remain key concerns for many insurers:

• High-rise buildings, such as Purpose-Built Student Accommodation (PBSA), Build to Rent (BTR), Private Rental Sector (PRS) and Hotel schemes, continue to pose an increased risk to insurers from a fire and water damage perspective, with the presence of cladding also a key consideration. Insurers are therefore scrutinising an insured's approach to fire safety and water management on such structures/projects, and tailoring applicable exclusions or declining to offer coverage for certain materials.
• A shift in focus to develop and repurpose existing buildings, following the decline in use of certain types of buildings and subsequent changes in planning legislation, has led to a rise in the number of these risks coming to market. Underwriters are therefore tailoring the breadth of coverage, price and excesses for these exposures, with a more stringent view on projects involving existing buildings of a historic nature due to the increased complexities inherent to such projects.
• Prefabricated modular construction may be seen as a way to address some of the challenges in the construction sector. However, underwriters are particularly concerned about the potential aggregation exposure from losses that may effectively be 'baked in'; due to the volumetric nature of these methods and may therefore seek to apply series loss clauses and potentially higher excesses to mitigate their exposure arising from the same, or similar, causes. Mass timber has become an increasingly popular choice within the construction industry due to its efficiency, durability, versatility and sustainability benefits, but the potential for rapid fire spread raises significant concerns for insurers. In the absence of detailed project information and mitigation measures, insurers may seek to exclude cover or at least limit their exposure to a specific value, number of floors or sum insured per continuous structure, whilst also seeking to apply increased excesses and higher rates.
• The increasing frequency and intensity of extreme weather events occurring in the UK and globally is causing greater losses and damage than ever before. Climate change, and how it has been accounted for in project design, is therefore a critical consideration, with the application of significantly increased excesses, rates and survey requirements for projects that are particularly exposed, if cover can be considered at all. If not, parametric solutions that offer predetermined levels of cover, which are paid out immediately upon a specified 'trigger' event occurring, may need to be considered as an alternative.
• Rising contractor administrations and supply chain insolvencies are a key concern for insurers, with several high-profile long-standing construction companies going bust recently, citing the depressed real estate market, difficult trading conditions and other inflationary pressures as causes. Insurers are therefore scrutinising company financial history and creditworthiness more closely, focusing on premium payment, applying non-refundable minimum and deposit premiums, and seeking toavoid lengthy instalment plans on projects. Capacity is available to support partially completed projects in the event of contractor insolvency, but terms and conditions are generally more onerous. However, capacity remains limited in the Latent Defects market for partially and fully completed projects, with insurers applying considerably higher rates due to the inherent exposure and lack of competition for these risks.