The construction insurance market is entering 2025 with optimistic caution. Shifts in underwriting priorities, new carrier entrants, end of year treaty renewals and evolving project risks are reshaping the landscape for developers, contractors, and insurers. Here’s a look at the significant trends, their impact, and what’s on the horizon.

Builder’s Risk: A Mixed Outlook Amid Natural Catastrophe Concerns

Compared to 2023, the Builder’s Risk market showed improvement with more carriers willing to underwrite for-rent, single-family home development projects. However, insurers remain selective in regions prone to extreme weather events such as wildfires and hurricanes. 

The year ahead promises to test preparedness and reward proactivity with insurers implementing stricter site security requirements.  Key factors driving new underwriting trends include heightened climate risks, growing demand in the for-rent development sector, and persistent supply chain and labor challenges causing project delays. Selective underwriting is expected to persist in high-risk areas. For-rent developments will likely remain bright, attracting carrier participation and competitive terms.  Delays in construction projects have made policy extensions harder to negotiate, prompting a need for earlier engagement in extension discussions.  Therefore, developers should anticipate ongoing scrutiny around policy extensions and ensure early preparation for those negotiations. 

Professional Liability: Competitive Market with New Entrants

The Professional Liability market remained competitive in 2024, with several new insurers entering the space for both contractors and owners. Carriers continue to underwrite heavily to the project delivery method as well as the contract terms, especially focusing on limitation-of-liability provisions. These factors significantly influence underwriting decisions from all facets - terms, premium cost in addition to limits deployed.

Healthy competition is expected to continue in 2025, providing insureds with more carrier options. However, contract scrutiny will remain a focal point. Project owners and contractors should prioritize contract review, particularly around delivery methods and limitation-of-liability clauses, to avoid delays in securing coverage.

Controlled Insurance Program (CIP) and Project-Specific Coverage: A Shifting Market

Controlled Insurance Programs (CIP) and project-specific coverages saw mixed results in 2024. Commercial-grade projects continue to receive favorable responses, but for-sale, wood-frame, and New York-based developments remain challenging for carriers. COVID-19’s impact on for-rent developments has also led to "flip" opportunities where recently completed rentals are being converted to for-sale properties. In cases where for-sale conversions are not included in the original construction program, insureds are forced to seek separate CGL/XS coverage, which can be costly and difficult to obtain.  Most insurers that can consider this risk profile are limited to the amount that may be approved in totality.  Meaning the number of carriers available for the class can fluctuate as time goes on.

The shift in Workers’ Compensation thresholds has also affected CIP programs. While the threshold was around $300M just a few years ago, it’s now closer to $500M as a starting point in many jurisdictions, making it harder for smaller projects to access the financial side of CIP benefits. In 2025, underwriting selectivity for wood-frame, for-sale, and New York-based projects is expected to continue. Developers should engage with brokers early to address potential gaps in coverage for flip projects and to understand the changing cost-benefit dynamics of including Workers’ Compensation in a CIP.

Contractors Pollution Liability: Stable and Competitive Market

The Contractors Pollution Liability market remained competitive in 2024, with stable rates and strong carrier capacity. This stability is expected to continue into 2025. However, coverage terms vary significantly by carrier, making it essential for insureds to review policy forms closely.

What Insurers Are Looking for in 2025

• Quality Submission: A quality submission is the first step in differentiating your project risk in the marketplace. Several key pieces of data can ensure a swift response.

• Project Team Experience: Representing the Owner/General Contractor's experience in the specific class of business proves the team's ability to deliver a quality build. If entering a new space, evidencing the due diligence exercised to house expertise and deliver a quality product is imperative for market attraction.

• Site Security & Safety: Site security remains a critical factor. Carriers now expect more sophisticated measures, such as badging systems, water mitigation technology, and camera surveillance, rather than relying on simple fencing. The storage of equipment and materials is also under scrutiny, as are employee safety measures. Highlighting return-to-work programs and mental health initiatives can further demonstrate a commitment to workforce safety and well-being.

• Data: Technology has provided the luxury of reviewing more data in a short amount of time than would have been previously possible. Typically, the more project specific relevant data that can be provided, the higher likelihood we have of a quick response and number of carriers willing to participate, as long as the class of business doesn’t remove them from consideration.

Preparing for 2025

While some firms are well-positioned to navigate 2025’s insurance challenges, there are critical gaps in preparation across the industry. Insurers are demanding more comprehensive data, earlier contract reviews, and improved site security protocols, but many insureds remain unprepared to meet these expectations. To succeed in this environment, developers and contractors must be proactive, data-driven, and ready to adapt. Early preparation, comprehensive submissions, and thoughtful project planning will be essential for success in the year ahead. 

Partnering with the right broker is critical to ensuring you’re ready for the challenges and opportunities ahead. Newfront’s industry expertise and strategic guidance can help you navigate market complexities, secure optimal terms, and address potential gaps before they become issues.  Developers and contractors can never prematurely engage their broker on upcoming project work which provides the opportunity to get ahead of underwriting requirements and any potential contract improvements. Reach out to Newfront today to position yourself for success in 2025.