Australia’s construction insurance market is navigating a period of elevated activity and increasing complexity, according to Aon plc’s 2026 Global Construction Insurance and Surety Market Report, released June 2. The report identifies residential construction, defence investment, and data centre development as the primary drivers of growth in Australia, while flagging persistent labour shortages and rising input costs as ongoing risk factors for insurers and project owners.
Australia’s contract works insurance market maintained robust capacity entering 2026, with strong local insurer participation complemented by growing engagement from London markets. The report notes that London insurers have increased both appetite and line size on Australian placements, reinforcing overall capacity and supporting competitive terms for well-presented risks. For well-performing construction programmes, insurers have shown renewed willingness to negotiate coverage enhancements that were tightened during the hard market, including softened exclusions, increased sub-limits, and more-favourable deductibles. Insurers are taking a favourable view of technology- and defence-related projects, which the report describes as preferred and in-scope risks, particularly when delivered by contractors with established track records in those sectors.
High-technology manufacturing projects, including data centre construction, are proliferating in Australia as demand for computing power grows. The report projects that an additional 1,500 megawatts of compute capacity will be required by 2030, pointing to a sustained pipeline of large, complex builds. Defence spending is also a material driver. The Australian government increased expenditure on defence projects in 2024 as part of efforts to modernise its fleet of aircraft and vehicles, and the report expects defence spending on new projects – including shipbuilding facilities – to continue rising through 2029.
Terence Williams, head of Commercial Risk for Asia-Pacific at Aon, noted the broader regional context shaping underwriting conditions for these projects. “Hyperscale data centres, battery, and semiconductor plants are driving demand for higher-value, more complex builds with extended timelines and greater delay exposure. Insurers are placing greater focus on how projects are governed and how data informs risk decisions,” Williams said.
Underwriting assessments in Australia are placing greater emphasis on the effects of persistent skilled-labour shortages, particularly in key trades and professional roles. The report attributes this focus to rising labour costs and slower project delivery, which it identifies as factors that materially heighten overall project and claims risk. Preparations for the Brisbane 2032 Olympic and Paralympic Games are expected to compound these pressures. Accelerated investment in transport infrastructure, venues, athlete and media accommodations, urban renewal, and supporting social infrastructure will create a multiyear pipeline of work across South East Queensland, adding further strain to an already constrained workforce.
Mary-Catherine Hamill, head of construction for Australia at Aon, outlined the implications for project delivery and insurance. “Australia’s construction pipeline remains strong across residential, defence, and technology-related projects, but labour availability is a real pressure point. In the lead-up to the Brisbane Olympics, competition for skilled workers is expected to intensify across major infrastructure, specialist trades, and professional roles, increasing cost pressure and the risk of project delays,” Hamill said.
Proposed amendments to the Design and Building Practitioners Act 2020, scheduled to take effect in New South Wales from July 1, 2026, are adding a layer of regulatory complexity to the market. The changes are expected to extend coverage to repair, alteration, and renovation work on existing Class 3 and 9c buildings and may introduce professional indemnity insurance requirements for building practitioners.
The report notes that while final settings remain subject to legislative outcomes, the proposed changes are likely to increase scrutiny of whether appropriate insurance capacity and risk frameworks are in place to support builders in meeting their regulatory obligations. New South Wales is also at the forefront of growing interest in latent defects insurance (LDI), with the report attributing increased uptake to regulatory reform, large-scale residential development, and heightened focus on building quality. Early engagement from other states and territories indicates a gradual broadening of LDI appetite nationally, according to the report.
The report identifies rising demand for surety bonds in Australia, as contractors look to manage balance sheet pressure stemming from higher material, fuel, and supply chain costs. Surety bonds are increasingly being used as an alternative to traditional bank guarantees, enabling construction firms to free up capital that would otherwise be tied to projects. “With project values increasing and supply chain costs remaining elevated, contractors are looking for ways to preserve liquidity. Surety is playing a larger role in Australia as businesses seek to unlock working capital without constraining bank facilities, particularly on large infrastructure and defence projects,” Hamill said.
At the regional level, the report describes the Asia-Pacific construction market as broadly competitive for well-managed risks with low loss history. However, it notes increasing segmentation, with strong insurer appetite for real estate and standard infrastructure risks contrasting with more technical pricing and selective capacity deployment for heavy civil works, underground construction, and projects in natural catastrophe-prone locations.
Insurers across the region have heightened their emphasis on catastrophe modelling transparency, delay in start-up (DSU) calculations, construction quality controls, and project governance – reflecting the growing scale and complexity of data centre, semiconductor, energy, and large-scale infrastructure projects in the pipeline. Project alliance agreements remained a common contracting structure in the Australian market into early 2026, particularly on large infrastructure projects, where shared risk and reward mechanisms and integrated stakeholder communication are valued by both contractors and insurers for their potential to support higher-quality delivery and more efficient cost management.
