Lockton has published a Project Certainty Guide that explains how a contractor’s failure can spread through a construction project. It also sets out steps organisations can take before it happens, including addressing delays, higher completion costs, cash-flow pressure and potential gaps in insurance protection.
The Sept. 9 release comes as construction remains Australia’s largest source of company failures. Construction made up 24.5% of the 14,152 businesses that entered external administration in 2025-26, according to Master Builders Association of NSW analysis. The same analysis found 2025-26 was the first financial year since 2020-21 to record a national decline in construction insolvencies, although levels remain historically high.
Lockton said the guide looks at what contractor insolvency can mean for principals, head contractors and subcontractors. It is written for construction leaders responsible for project delivery, financial performance and risk. That includes principals and project owners, head contractors, subcontractors, project directors and construction managers, and CFOs, risk managers and insurance managers.
The guide has five parts:
Lockton said teams can use the checklist to pressure-test current arrangements, identify potential gaps and strengthen resilience before disruption occurs. Brokers advising clients in these groups can use it as a framework for reviewing those same four areas. The guide is available to download from Lockton’s Australian site.
Analysis from the Australian Industry Group (Ai Group) shows Australian business collapses are running 75% above pre-pandemic levels. Construction accounts for the largest share, with insolvencies in the sector rising from 1,515 in 2018-19 to 3,475 in 2025-26. Ai Group chief executive Innes Willox said the pattern points to a structural shift in business conditions and confidence rather than a temporary dip.
The shift is reaching insurers. According to a July 2026 market update from advisory firm Bellrock, trade credit insurers are using buyer-level assessments rather than broad sector exclusions. Bellrock described the market as soft, with capacity available even as underwriting stays disciplined. Equifax data cited by the Australian Institute of Credit Management show small construction firms with fewer than 20 full-time staff are more exposed than larger firms, with direct implications for underwriters pricing trade credit, surety and professional indemnity risk.
Cash-flow pressure is also building. Research from finance advisory firm Scale Suite said the ATO’s Payday Super rules, which began July 1, 2026, require employers to align superannuation payments with regular pay cycles. That removes a buffer many strained businesses had relied on. The same research found cover such as Home Building Compensation in NSW may not fully offset costs when a builder collapses mid-project.
In Victoria, Home Warranty replaced Domestic Building Insurance from July 1, 2026, for projects up to three storeys and valued at more than $20,000. The maximum cover is $400,000. The previous scheme set the limit at $300,000. Under the old scheme, homeowners could claim only if their builder died, disappeared or became insolvent. Home Warranty also applies where work is incomplete, defective or non-compliant and the builder cannot or will not fix it. Building and Plumbing Commission CEO Anna Cronin said the new cover will “save homeowners time and money otherwise spent on legal action” recovering out-of-pocket costs.
Disputes further down the contracting chain are playing out in court. Sydney carpenters Assia Betyo and Ninab Adam said they are owed $54,000 on a Warriewood townhouse project and are pursuing head contractor KCorp. KCorp disputed the claim, saying it held a liquidator’s report showing the business was not insolvent. NewsWire noted KCorp did not respond to further requests to verify that claim. Betyo said it was “harder and harder to trust people when it comes to this type of job.”
Lockton’s guide opens with a short statement of the problem: “Construction insolvency rarely affects a single party.”
