The sharpest divergence in North American construction insurance is not at the pricing level - it is at the coverage level, and it is widening. US insurers have replaced London Engineering Group 3 clauses with proprietary wordings carrying stricter defect definitions, higher deductibles and embedded sublimits that reduce recovery on contractor-caused losses. In Canada, LEG3 coverage remains the standard, though legal disputes over the distinction between damage and defect have confined the market to the 1996 form rather than the updated 2006 version. For brokers advising on cross-border or large-scale construction programs, the gap between what a US and a Canadian placement delivers at the coverage level is now a material program design consideration, not a technical footnote.
Marsh's Q1 2026 Construction Market Update, which covers capacity, pricing, coverage and underwriting trends across both markets, documents the divergence across builder's risk, casualty and professional liability lines against a backdrop of geopolitical volatility, tariff pressures and economic uncertainty.
The capacity divergence reinforces the coverage gap. US markets face continued limitations on individual insurer participation, compounded by reinsurance challenges as project values rise. In Canada, domestic insurers are expanding capacity and pursuing growth targets that have produced oversubscription even on complex projects, with new insurers entering the professional liability segment and pushing project-specific capacity above $100 million. Annual professional indemnity rates in Canada are flat or up 2-5%.
In the US, well-managed projects in areas with limited catastrophe exposure saw premium reductions of 5-8% through the second half of 2025. Despite those reductions, insurers maintained caution on natural catastrophe risks - particularly wildfires and severe convective storms - and the favorable conditions were attributed in part to the absence of a major industry-wide loss event. In Canada, pricing stayed competitive on the back of ample market capacity, though insurers maintained higher deductible minimums reflecting claims inflation. Water damage remained the leading source of construction claims across Canada. Catastrophe-exposed projects and higher-risk occupancies continued to face tighter underwriting and elevated deductibles in both markets.
US casualty is the market's clearest pressure point and the one where coverage tightening and claims severity are reinforcing each other most directly. Marsh's Global Insurance Market Index for Q1 2026 recorded a 9% casualty rate increase in the US for a second consecutive quarter, driven by persistent claims severity, against overall US commercial rate declines of 1%. Construction casualty rates ran flat to up 5%, general liability flat to 10%, and auto up 5-20%.
The nuclear verdict trajectory gives those figures their specific severity context. Jury awards exceeding $10 million rose 52% from 89 in 2023 to 135 in 2024, with combined value jumping 116% to $31.3 billion according to research firm Marathon Strategies. Construction and engineering accounted for $2.0 billion of that total. Marsh attributed US casualty rate increases to nuclear verdicts, third-party funded litigation, inflation and higher interest rates. For a US construction program already absorbing proprietary wording reductions in builder's risk recovery, the casualty severity trend adds a second simultaneous pressure on total program economics that the headline pricing reductions do not offset.
Marsh predicts US construction growth in medical facilities, airports, large-scale infrastructure and educational institutions - segments that typically carry higher builder's risk values and more complex professional liability exposure, compounding the coverage quality question at the moment US wordings are tightening. In Canada, expected expansion centers on mining, civil infrastructure and manufacturing.
Paul Knowles, global chairman of construction at Marsh, said geopolitical volatility was shifting trade dynamics and uneven economic conditions were influencing project pipelines, costs and contract performance across the sector.
