The global construction insurance market is showing clear signs of softening, with increased competition driving premium reductions in certain segments, according to a recent report from Gallagher Specialty.
After a prolonged period of rate hardening and underwriting discipline, insurers are now adjusting strategies as new capacity enters the market and pressure builds to retain and grow portfolios.
Premium decreases are becoming more common on well-performing annual contractor programs and projects with limited exposure to natural catastrophes (NatCat). Insurers are offering more favorable renewal terms, including long-term agreements with flat rates or pre-agreed discounts, as a way to secure accounts with strong claims records.
While high-risk projects, such as those involving combustible materials, complex construction methods or exposure to wind, flood and seismic risk, continue to attract technical pricing, competition elsewhere is intensifying.
Capacity remains available for major international risks, though there is some hesitation in fully deploying it on large-scale projects as overall construction values increase, the report said. At the same time, changes in procurement legislation in certain jurisdictions have reduced the need for international capacity, further tightening competition. New entrants, including MGAs and follow-market providers, as well as expanded underwriting teams in regional hubs, are contributing to this shift.
Meanwhile, the professional indemnity (PI) market for construction professionals has softened more quickly. Rate reductions have been observed across the board, particularly for excess layers. Improved profitability in 2023 and early 2024 has given insurers more room to grow. Fire safety and cladding coverage, previously restricted, is gradually returning on a limited basis, especially for risks with robust risk management and clear historical project reviews.
Legacy risks, particularly those tied to projects completed prior to regulatory changes in 2018, continue to be treated with caution. Insurers are scrutinising the financial health of contractors and their supply chains, amid ongoing insolvencies and tight margins across the construction industry.
NatCat risk continues to be a key underwriting concern. Although earthquake and windstorm pricing has held steady, growing awareness of climate volatility and the rising frequency of severe weather events has led to increased scrutiny of flood and storm mitigation measures. Insurers are also preparing for potential volatility in the 2025 US windstorm season.
While the market is shifting, technical discipline has not been abandoned. Insurers are adapting to current conditions, balancing competitive pressures with the need for sustainable underwriting.
The second half of 2025 will be critical in determining whether the current softening trend holds, according to the report.
