Construction has become more than one of the largest sectors within the professional indemnity (PI) market. According to Teresa Yardley (pictured), head of professional indemnity at NBS Underwriting, it has become a useful indicator of where the wider PI market is heading as legal reform, changing contractual responsibilities and emerging risks reshape underwriting.
Construction was one of the first sectors to harden in response to cladding, fire safety and long-tail liabilities, and is now among the first to see competition return as insurers regain confidence in pricing and risk selection.
For Yardley, the sector demonstrates both sides of the insurance cycle: how quickly insurers can withdraw or restrict capacity when systemic concerns emerge, and how confidence can return through stronger risk selection, pricing adequacy and client controls. That changing market dynamic has also been reflected in broader trends across construction insurance.
Construction's defining characteristic has always been its long-tail exposure, but recent legal reforms have extended that risk significantly. Yardley pointed to the Building Safety Act and changes to the Defective Premises Act, which introduced retrospective limitation periods of up to 30 years for certain historic claims and 15 years for future claims. Those liability changes have also prompted insurers to revisit construction PI cover.
"The long-tail nature of construction risk has always meant that claims can emerge years after completion, but that exposure has been extended significantly by the Building Safety Act and changes to the Defective Premises Act," she said. For architects, engineers, chartered surveyors and contractors, that has made it increasingly important to consider how professional decisions made today could be judged many years into the future.
In 2025, the Supreme Court reinforced that position in URS Corporation Ltd v BDW Trading Ltd, confirming that Defective Premises Act claims can proceed up to 30 years after completion and that professional consultants, including engineers, fall within the Act's scope.
Scrutiny has intensified since architects emerged as the profession most exposed to PI claims in the wake of the Grenfell Tower disaster. "Underwriters examine how firms interpret building regulations, evidence compliance and retain project records," Yardley said. Claims and notifications arising from cladding, fire safety and wider building safety issues have also encouraged insurers to look for similar patterns of exposure elsewhere, rather than assuming each issue is isolated.
Yardley also pointed to the effect of claims inflation. "Remedial works, professional fees, materials, labour and financing costs are all more expensive, which means even common faults can now generate materially larger losses than would have been expected a few years ago," she said.
The widespread adoption of design and construct procurement has fundamentally changed where professional liability sits within the construction supply chain. While responsibility for design was once more clearly divided between consultants and contractors, contractors are now frequently the single point of responsibility for both design and delivery, even where the design work itself is carried out by consultants or specialist subcontractors.
"In practice, that means more contractors now need PI cover, including businesses that historically may not have seen themselves as carrying a professional exposure because they did not undertake design in-house," Yardley said. "It is no longer enough to know who physically carried out the work; we need to understand who accepted contractual responsibility."
That changing allocation of responsibility has also made contract review increasingly important. Yardley said businesses should understand whether contracts introduce obligations that extend beyond the scope of standard PI cover, including fitness-for-purpose requirements, uncapped liability, onerous collateral warranties and long-term insurance obligations. Reviewing those provisions before contracts are signed can help firms negotiate more appropriate wording and avoid unintentionally assuming liabilities beyond the common law duty to exercise reasonable skill and care.
Despite growing awareness of professional liability, Yardley said several misconceptions continue to expose firms to unnecessary risk.
"Another common misconception is that a contractor has no design liability if the design was subcontracted to another party," she said. "Contractually, that is often not the case." Where a contractor has accepted design responsibility under the main contract, it may remain liable to the employer even where an architect, engineer or specialist subcontractor was negligent.
Yardley also said many firms misunderstand how PI insurance responds after projects have finished. "Because PI is written on a claims-made basis, cover needs to be in place when the claim is made, not just when the work was carried out," she said. For construction firms and professional practices, where defects may emerge many years later, maintaining appropriate run-off or continuing cover remains a critical part of risk management.
She also cautioned against assuming that a softer market automatically means all historic restrictions will disappear. While coverage is improving, she said, it is often on a risk-by-risk basis, with fire safety and cladding covers still potentially subject to sub-limits, aggregation, retroactive date restrictions or limitations around rectification costs.
While many underwriting concerns remain rooted in traditional construction risks, Yardley said insurers are increasingly assessing how firms adopt new construction methods and emerging technologies.
Modern methods of construction, including prefabricated, modular and other off-site manufactured elements, can improve efficiency, consistency and sustainability but may also create aggregation risk if the same design or installation issue is repeated across multiple projects.
Underwriters are also paying closer attention to how new responsibilities introduced by the Building Safety Act are appointed, coordinated, evidenced and insured across the life of a project.
"Artificial intelligence is becoming another underwriting consideration," Yardley said. AI-assisted design and document review may improve efficiency, but they also raise questions around human oversight, accountability and evidencing professional judgement.
Construction has shown that long-tail professional liability can change very quickly when legal reform, social expectations, technical complexity and claims inflation all move at the same time, Yardley said. That lesson, she added, is likely to influence professional indemnity underwriting well beyond construction.
The firms best placed to benefit from a changing market will be those that can clearly explain what they do or have done, where their exposures sit, and how they manage professional risk day to day.
