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Survey Report

Insurance Marketplace Realities 2023 - Construction

December 1, 2022

Certain high hazard exposures and contractors with challenging risk profiles will continue to experience rate increases, but the rate of these increases will be tempered as the market improves.
Rate predictions: Construction
Trend Range
General liability Increase (Purple triangle pointing up) +5% to +10%
Auto liability and physical damage Increase (Purple triangle pointing up) +5% to +15%
Workers compensation Neutral increase Flat to +5%
Umbrella (lead) Increase (Purple triangle pointing up) +5% to +15%
Excess Increase (Purple triangle pointing up) +5% to +20%
Project-specific builders risk Neutral increase Flat to +10%
Master builders risk/contractors block programs (renewable business) Increase (Purple triangle pointing up) +10% to +20%
Professional liability Neutral increase Flat to +10%
Contractors pollution liability Neutral increase +5% to +10%
Project-specific/controlled insurance programs Increase (Purple triangle pointing up) +5% to +15%; +10% to +40% for excess
Subcontractor default insurance Neutral increase Flat to +10%

Rate increases are moderating.

  • With an influx of capital into the market, compounded by increased competition for quality risks, the market has shown increased trending toward flexibility in pricing and coverage offerings.
  • While increased carrier competition may yield better renewal results, incumbent partners continue to be an attractive option for most annual renewals. Often the familiarity with the contractor’s operations provides incumbent carriers a level of confidence that allows for increased underwriting flexibility.
  • Renewal rate increases continue to decline across all casualty lines. After peaking in the third quarter of 2020, with an average rate increase over 46% for umbrella and 108% for excess, (WTW “State of the Casualty Marketplace” 2022 Q2) the umbrella and excess liability lines have seen the most stabilization.
  • Interest rates are on the rise and, while they have a strong long-term relationship with improved combined ratios, interest rates will potentially only play a minor role in short-term changes in underwriting metrics.

Construction activity is expected to rise in 2023.

  • The construction industry is beginning to feel the effects of the Infrastructure Bill; however, infrastructure projects to date have only represented the tip of the iceberg as contractors expect to add additional work in the coming years.
  • The trend for investment in renewable energy remains strong, and we expect it to increase with funding from the Infrastructure Bill.
  • Courts’ backlogs are still being worked through.
  • Courts are diligently working through backlogs that were caused by the COVID-19 pandemic. We expect an increased number of large verdicts and construction defect claims, which will continue to negatively impact renewal results for the next few years.
  • A recent survey published by the Thomson Reuters Institute revealed that the average backlog in state and local courts increased by approximately one-third between 2020 and 2021.
  • Reinsurance results play a major role in many casualty renewals.
  • The tightening of terms in reinsurance renewals have negatively impacted contractors’ abilities to achieve their desired renewal results from both a rate and coverage perspective.
  • The positive trajectory of the Fitch, AM Best, and Moody’s ratings on the reinsurance market may signal light at the end of the tunnel for many contractors.

General liability (GL)

Rising labor costs to combat the labor shortage and the impact of inflation on the costs of materials continue to increase the underlying exposure bases that underwriters use to determine overall premium. While increased exposure bases are driving up premiums, it is unclear at this point if this directly correlates with increased risk.

  • The mounting pressure on contractors’ margins is a result of the unpredictability in the cost of materials.
  • The burdens placed on supply chains threaten timelines and overall viability of projects. This may result in contractors needing to use less-familiar materials and suppliers to meet their deadlines. Contractors should fully research new materials and suppliers to avoid circumstances that could give rise to GL claims (construction defect).
  • Recent interest rate hikes are likely going to cool off the residential construction market, although it’s not yet clear to what extent.
  • The construction industry is facing unprecedented labor shortages requiring contractors to offer higher wages to bring people back to work. As wages are a primary exposure base for GL premium rating, insureds can expect increased premiums, even when the number of workers on the payroll remains the same. (GlobeSt)
  • Reinsurance terms have further limited the market’s ability and flexibility to write certain high hazard construction operations. Contractors with these operations will need to demonstrate a higher degree of care to meet the demands of increased underwriting scrutiny. Favorable loss performance and clear commitment to safety will help bring more markets to the table.
  • There is increased competition among carriers for best-in-class risks, resulting in positive marketing outcomes. In some circumstances, renewal decreases are being obtained.
  • Well-organized submission data is paramount to achieving the most positive renewal outcomes. Due to recent market changes, submission flow has increased, so best-in-class submissions are often pushed to the top of the underwriters’ desks and given more opportunities for underwriting credits.
  • Developing carrier partnerships is a valuable approach in this marketplace. These partnerships allow for more flexibility in underwriting and more predictable renewal results.

Auto liability (AL)

The auto market continues to be challenging; however, rate increases are beginning to moderate.

  • The driver shortage has put added pressure on contractors to find suitable drivers. As a result, many firms are considering loosening driving requirements to keep up with their demands.
    • Labor/driver shortages have prompted contractors to enlist younger drivers. Insurance carriers are scrutinizing driver safety programs when evaluating and pricing risk. Furthermore, insurance carriers may look to limit exposure to less experienced drivers by restricting coverage.
  • Fitch notes that the pandemic’s socioeconomic changes led to an “unprecedented decline” in commercial auto claim frequency. However, regular increases in claim severity have been a key factor behind the chronic underperformance of commercial auto over the past decade, according to the report.
  • Large and heavy fleets continue to drive increased rates.
  • Insureds with large commercial fleets are experiencing pressure on primary automobile liability attachment points and increases in lead umbrella pricing. These increases put upward pressure on excess layer pricing.

Workers compensation (WC)

Workers compensation still exerts a stabilizing influence on most contractor’s programs — balancing out rate pressure on general liability and auto.

  • Mounting backlogs and labor shortages are putting pressure on contractors to hire less qualified and less experienced workers to keep up with demand. Reliance on younger, often less skilled labor potentially increases exposure to injury. Safety training and a strong commitment to loss control is more critical than ever to maintain a safe and healthy labor force.
  • The use of job monitoring technology is becoming commonplace and proving effective when employed correctly.
    • Additional collaboration between management and jobsite employees to ensure that proper protocols are being followed has been an area of focus with the introduction of new technology.
  • The ongoing stability of workers compensation underwriting experience has enabled contractors to offset rate increases in general liability and automobile liability rates.
    • As a result, pairing workers compensation with other lines of business is the most effective way to maintain stability in the overall casualty program.
  • Despite the loss stability on this line of business, premiums are being affected by the increase in underlying payroll exposures due to the competition for labor.
  • Rising healthcare costs will continue to pressure carriers to increase workers compensation rates to maintain targeted loss ratios.

Umbrella/excess liability

Umbrella/excess carriers, while continuing to seek increases, have become more flexible with pricing and their overall approach, as recent trends indicate renewal rate increases tapering. While the market has shown overall improvement, coverage grants and attachment points will still be scrutinized.

  • After more than two years of an exceptionally hard umbrella and excess market — where the availability of lead umbrellas, unsupported by the primary lines, virtually dried up — most contractors have now paired their primary and lead umbrella programs with the same carrier to achieve the most optimal renewal results.
  • Although new capacity has entered the space, increasing competition, most carriers prefer to deploy this additional capacity in multiple ventilated layers and not necessarily in a single tranche.
  • Rate increases on lead umbrellas have stabilized, but average renewal rates continue to be more favorable when renewed with incumbent carrier.
  • The London and Bermuda markets have become increasingly more price-competitive at historically lower attachment points.
  • Contractors who operate in challenged industries or have perceived high hazard exposures — including PFAS, wildfire, residential and New York operations — are experiencing higher rate increases, capacity challenges, and are often forced to take on higher retentions and reduced coverage to reduce overall costs.

Controlled insurance programs (CIPs)

Class-of-business-dependent, we have seen the direct marketplace allow for more creativity in offered coverage in addition to competing on desired program layers, thus creating a more predictable cost for commercial project-specific placements. Difficult classes of business (location- and risk profile-dependent) remain heavily written in the E&S space with a large variability in cost.

Whether pursuing an owner-controlled or a contractor-controlled program, a robust submission with comprehensive underwriting data remains the most important factor in pursuing carrier support for CIPs.

  • The drastic cost increase of materials is driving premiums up even while achieving a competitive rate.
  • A robust submission is imperative and includes sponsor experience, general contractor performance and history, loss control measures and specific details surrounding quality to ensure a successful project delivery.
  • Being able to demonstrate risk management strategies at the sponsor level provides much needed transparency and comfort for the carrier to trust in the partnership of insured and insurer. Concern surrounding the CIP becoming a catch-all is mitigated when multiple lines of coverage are purchased for the project.
  • Carriers have invested much time and many resources to offer risk control technologies that improve project success and reduce the potential for loss. Their availability should be considered when selecting an insurance carrier.
  • Direct carriers are laser focused on creating long-term partnerships in support of project-specific programs and show more creativity and flexibility when the insured desires the same.
  • While market conditions are gradually improving, moderate rate increases are still expected.
    • Carriers remain reluctant to deploy a full $25 million in limit resulting in multiple quota-share layers for large limit towers.
    • Although some new entrants have emerged from the global marketplace, obtaining lead umbrellas remains one of the most difficult challenges. Lead excess limits on difficult risks remain low for deployed capacity hovering between $3 – $5 million.
  • Reinsurance treaties most often align with quarter ends, which proves difficult when attempting to hold quotes open beyond the renewal date. Open quotes are either re-underwritten, resulting in a price increase, or a market will leave a class of business in total, no longer making the program viable. It is important to align formal submission release with construction start date as best as possible so as not to run into this scenario.
  • Extensions remain extremely difficult to secure at original program pricing and are highly dependent on project experience as well as on remaining work scope and location. If requiring an extension is a known need, it is best to begin the process as soon as possible.
  • Including a small percentage of difficult classes in large rolling programs used to be an exception that could be negotiated, but we expect that these classes will require separate stand-alone programs.
    • Uncapped per-project limits are more difficult to secure.
    • Products completed operations aggregates are typically limited to one-time per project including the statute of repose, whereas historically providing one for construction term plus one for statute was the norm.
    • New York remains a challenging jurisdiction causing most carriers to only offer general liability on a very large or matching deductible basis.
  • Frame, residential and single-family build-to-rent portfolios are typically only supported in the E&S marketplace.
    • Single family build-to-rent projects are limited to an allotted amount for the book in total, and once the carrier has reached that capacity, another market must be used. There is not a robust number of markets willing to entertain this new trend.
    • Problematic jurisdictions continue to force for-rent, commercial grade projects into the E&S marketplace, with large rate increases on both primary and lead, as most carriers consider the lead excess to be a working layer.
    • Some carriers classify “anything with a pillow” as containing a residential component forcing a push into the E&S space.

New York controlled insurance programs (CIPs)

Loss experience in NY shows no signs of slowing down when it comes to liability and continues to drive price increases in the state. Most primary layers are written with a rate on line approach.

  • The marketplace underwrites the state in its entirety as being New York Labor Law exposed, whereas in the past, provided an opportunity outside the five boroughs, which used to be a more attractive component to gain interest in the project.
  • Under a CIP, if an enrolled contractor’s worker sustains an injury resulting from a fall or a falling object, the typical result is a labor law general liability claim in addition to the workers compensation claim.
  • Nuclear verdicts have no sign of slowing down when it comes to labor law.
  • New York State courts tend to lean as broadly as possible to favor injured employees.
  • Alternative dispute resolution (ADR) has been employed on a major upstate project, resulting in reductions in the frequency and severity of labor law claims. However, such programs require long lead times to initiate and implement properly.

Builders risk

There is generally ample capacity in the builder’s risk market, but capacity can be restricted based on location/CAT exposure, project size and type of construction. Prototypical technologies, alternative construction methods or materials (such as modular or CLT) and natural catastrophe-exposed projects continue to face hesitancy from the marketplace and/or more restrictive terms and conditions.

  • Limited underwriter bandwidth and increased underwriting discipline require longer lead times to quote. Providing complete and accurate underwriting information is a prerequisite. Carriers are looking to partner with clients that can demonstrate strong risk controls highlighting best-in-class supply chain efficiencies and on-site protections.
  • Coverage drivers:
    • Water damage and water intrusion — Water damage losses continue to challenge the market. Higher water damage deductibles can be expected, especially on high-rise, residential and wood frame projects. Lower water intrusion sub-limits may be imposed on wood frame projects.
    • High CAT-exposed projects — Carriers are still looking to achieve technical adequacy for CAT pricing as natural catastrophes worsen year after year.
    • LEG 3 and damage to existing property — If and when these coverage extensions are offered, higher rates and/or deductibles usually apply. Carriers may impose serial loss clauses and/or sublimits applicable to LEG 3.
    • Market scrutiny continues around valuation and adequacy of original policy limit due to supply chain challenges, building supply shortages and skilled labor shortages. Carriers have been reluctant to offer significant increases to escalation clauses to this point. As such, brokers should revisit budgets with project teams throughout the project life cycle and adjust the limit of liability as needed.
    • Capacity restrictions heading into Q4 — Some carriers may be reaching their premium caps for new business which may further restrict available underwriting capacity at the end of the year.

While extension terms and conditions remain challenging, carriers have been more flexible and, on most projects, are continuing to partner with clients through the project completion.

  • Increased rates and deductibles, in addition to possible restrictions in coverage, can still be anticipated on extensions beyond pre-agreed policy terms. Projects with losses, heavy cat-exposed locations or opportunities backed by reinsurance support can still expect more severe restrictions and corrections in rate and overall terms.
  • Early engagement with the carrier when an extension is needed remains crucial. Providing detailed project status information along with ongoing protections in place at the project site is key.

The wood frame market continues to be extremely challenging, with finite capacity causing rates to rise.

  • Large-scale developments/projects are becoming more common, and the need for multiple carriers on a single risk leads to premium increases and possible non-concurrent terms and conditions.
  • Adequate lead time for wood frame submissions as well as complete underwriting submission details is critical; turnaround takes weeks to months depending on project size and complexity.
  • Coverage drivers:
    • Site security is a requirement for most large wood frame construction. Risk managers and contractors should look at site security as part of the all-in construction cost instead of an additional cost. Electronic service monitoring can be costly, depending on the scope of work and length of the project. Engaging vendors early will assist in estimating costs.
    • Water detection service implementation on wood frame projects is encouraged. While not always a requirement, it does help separate a project from others and increases carrier appetite.
    • Crime scores are closely monitored on all projects, as civil unrest, riots, arson and looting in certain geographies have proven challenging to underwrite. Buyers should anticipate higher rates and even stricter security requirements in these locations.
    • Wildfires continue to be front-of-mind for underwriters, and wildfire deductibles or restrictions may appear on new placements.
    • Wind/hail limit and deductibles for projects within high-risk areas may appear on new placements.

Professional liability

The construction professional liability market remains relatively competitive, although increased underwriting scrutiny continues, with carriers careful about capacity deployment and retention levels.

  • While some insurers have reduced limits on specific coverage parts or on an overall book portfolio basis, the marketplace continues to see many insurers offer at least $10 million per risk to insureds, with others able to offer up to $25 million.
  • Total market capacity for contractor’s professional annual practice programs is estimated to be $350 million to $400 million, while project-specific placement estimate is reduced to $250 million, because many insurers have reserved this capacity for practice or annual clients.
  • Growing pressure on insurers to report rate increases is due to macro elements of U.S. inflation and micro elements of mergers/acquisitions by the insurers parent company.


  • Insurers are underwriting each risk on a case-by-case basis and, while there is no consensus among insurers, they are advocating for firms focusing on third-party design, in-house and subcontracted design build to consider higher retentions.
  • More recently the coverage of first-party rectification/mitigation has become a focal point for insurers, especially on project-specific placements. Depending on a project’s delivery method, we are now seeing requests for a percentage of design completion greater than 30%, and a push for no limitations of liability in designers’ subcontracts with the insured.
  • Continued competition and the presence of new entrants in the marketplace have alleviated past concerns of rectification being sub-limited on annually renewable practice programs.

Claim environment

  • Insurers continue to report significant and severe first-party rectification claims, as well as claims derived from “solar and heavy infrastructure.”
  • Additional underwriting caution is being detected from “Heavy EPC, IPD and P3” project exposures.

Single project policies

  • There is ample capacity available for project-specific placements for contractors. Some insurers are reserving project capacity on specific placements exclusively for clients who are buyers of their annual renewal practice programs.
  • Total terms (policy period plus extended reporting period) of 15 years are widely available, although some insurers are starting to limit extended reporting periods to applicable projects state statute of repose or contractual requirement, whichever is less.
  • Design professionals in the architects and engineers’ industry have seen project capacity leave their marketplace, thereby rendering these placements more difficult to secure on large project placements, especially on design/build infrastructure projects.
  • Reduced available capacity for design professionals has adversely affected contractual negotiations that design/build contractors have with owners. This, coupled with the push for limitations of liability from design professionals, is in turn making contractor-purchased project placements more expensive and difficult to structure.

Contractors pollution liability

Construction project and bid activity continues to be strong, as is the resulting demand for contractors pollution liability (CPL) coverage which should expand into 2023. CPL remains a desirable line of coverage for more than 30 carriers who underwrite it, although slight rate increases are anticipated as carriers work to achieve adequate rate across their entire book of business.

  • Carriers are looking to achieve effective rate increases commensurate with their loss experience and appetite across their renewal books by employing underwriting methods, such as premium increases, shorter policy terms and reduced capacity.
  • Contractors pollution liability programs continue to experience rate increases largely due to the market-wide performance of site pollution products, but these increases are kept in check (+5% to +10%) by markets competing for this desirable line of business.
  • Site pollution continues to experience higher rate increases (+5% to +15%) resulting from increased claim activity, remediation costs (fuel and labor), and regulatory uncertainty from emerging exposures (i.e., PFAS).

For coverage and claims, carriers are looking to:

  • Reduce capacity for renewals, which could impact practice policies/rolling wrap ups with larger limits
  • Scrutinize known conditions at project/redevelopment sites with respect to capital improvements/soil management
  • Increase underwriting scrutiny for indoor air quality (IAQ — i.e., mold and legionella) exposures in a post-covid market
  • Achieve adequate pricing to cover the ever-increasing environmental claim frequency and severity in the marketplace — especially in the habitational, hotel, hospitality, and hospital sectors

Exposure spotlight

  • PFAS: As predicted, per- and polyfluoroalkyl substances (PFAS) exposures are challenging standard lines insurance markets for all lines of coverage, including property and products liability. As environmental regulators consider the classification of these chemical as hazardous substances, researchers are racing to develop potential remedial solutions. Meanwhile, carriers are all but eliminating coverage for PFAS on site pollution (and increasingly on contractors pollution) programs because of increased activity from environmental regulators and third-party lawsuits.
  • ESG (environmental, societal, governance): ESG principles may begin to factor into certain contractor sectors and aspects of projects, including project site waste management, and natural resource consumption and conservation.
  • IAQ (indoor air quality): IAQ coverage for mold and Legionella has become more difficult to secure and is increasingly subject to sublimits, higher retentions and per-bed/door retentions for the healthcare and residential real estate sectors.
  • Redevelopment: Claim activity related to redevelopment of brownfield properties continues — although carriers try to limit exposure by adding exclusions or coverage restrictions associated with soil management, historic fill, dewatering and voluntary site investigations.
  • Stormwater: We are also seeing increased contractors pollution and professional liability claim activity relating to excessive siltation and stormwater run-off from construction sites, with claims brought by project owners, citizen action groups and regulatory agencies.

Subcontractor default insurance (SDI)

SDI carriers continue to add capacity in anticipation of continued growth in demand into 2023 and beyond. As delayed projects get back online, we are seeing steady increases in backlog for the remaining of 2022 and into 2023. Access to qualified labor, continued limitation of materials, and inflationary impacts will be key challenges to getting this work done. Owners, developers and general contractors continue to leverage the comprehensive coverage SDI provides to ensure operations and projects are protected against subcontractor default.

  • The SDI marketplace now has eight carriers, including six that we consider actively engaged in the product line. Four of those five can offer single limits of $50 million or greater per loss.
  • Carriers continue to offer flexibility for annual and multiyear programs and on subcontractor enrollment amounts, which is opening SDI programs for small, mid- and larger-sized contractors.
  • With the introduction of new capacity and choice, buyers should review current policy terms, conditions and pricing.
  • Underwriting in the current environment will continue to present challenges. SDI carriers are critical of contractors who are altogether new to SDI, and virtual underwriting meetings may not be sufficient to build trust. Carriers are open to travel for in-person underwriting and risk engineering visits, which is driving more concrete relationships.
  • For the near term, contractors will have to contend with inflation, material and supply uncertainty and ongoing qualified labor constraints. We expect contractors to consider a balance of SDI and subcontractor bonds to get through this period of growth and uncertainty.
  • Despite current uncertainties, the SDI marketplace is robust. Markets are responding responsibly with some adjustments to their program offerings. In addition to the overall increase in market capacity, the entrance of a new carrier at the beginning of 2022 offering significant limits, without legacy exposure, provides an additional option for both the near and long term.


Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).


Construction Broking Leader, North America

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