Aluminum and steel producer prices rose 33 percent and 20.7 percent, respectively, year-over-year as of January 2026, according to the Associated General Contractors of America. For a wrap-up insurance program tied to a large construction project, that inflation does not create a liability coverage gap. It does, however, build up as additional premium at final audit, often when clients are least able to absorb it.
Kris Bauer (pictured, left) and Michael Yovino (pictured, right), co-leaders of Jencap's wrap-up construction practice, explain where that exposure accumulates and what brokers can do at program inception.
The underwriting factors that shape a wrap-up insurance program haven't shifted because of tariff-driven cost inflation. End occupancy, state jurisdiction, soil conditions, and builder pedigree all still drive rate development.
Construction cost inflation, driven by tariffs on steel and aluminum, makes it harder to set an accurate cost figure at binding, according to Bauer and Yovino. "The challenge is on the buyer/GC/broker side in developing a construction cost figure that assumes some inflation during the construction term," they said.
On the liability side, the coverage holds regardless of how much project costs rise. What changes is the additional premium (AP) that comes due at final audit.
"From a liability perspective, there is no coverage gap in this scenario," Bauer and Yovino said. "There is just an AP due at final audit of the project policy when completed. The initial policy rate would apply to the increased costs above the original estimate."
The property and course of construction (COC) side carries a different kind of risk. If actual project costs exceed original estimates by a material amount, coinsurance issues can arise on the property coverage, the co-leaders added. That risk needs to be addressed at program inception, rather than after overruns materialize.
Carriers have not amended their underwriting approach to account for tariff-driven construction cost inflation, Bauer and Yovino noted. No new rate factors, adjusted coverage forms, or pricing mechanisms specific to tariff exposure have appeared in the wrap-up insurance market.
That absence transfers the strategic burden to the broker and insured. The tools needed to manage the exposure are structural, and the window to put them in place is at program inception.
"The onus is really on the insured and their broker to form a strategy to mitigate the effects of tariff cost increases and corresponding, inevitable delays," Bauer and Yovino said.
Brokers who wait for carriers to adjust at renewal will have fewer options at project close, they added. The tools that already exist need to be negotiated before construction starts.
Brokers have two structural tools to limit audit exposure on a wrap-up insurance program: a longer policy period and swing clauses. Both need to be negotiated at binding.
"Brokers should use their recent/past experiences with project programs to advise their client of the potential pitfalls to not being conservative in their cost estimates at time of binding," Bauer and Yovino said.
Swing clauses let the final construction cost figure move up or down from the original estimate without triggering an additional premium at audit. The co-leaders added that brokers should be intentional about accounting for delays and inflation and negotiate both protections at program inception, not mid-build.
The most common mistake, Bauer and Yovino said, is "trying to save on up-front premium costs by underestimating... the final cost of a project and how long it will take."
"One has to consider that tariffs can cause delays in acquiring materials, which can then delay labor and key city/muni signoffs," they said.
Carriers often carry a minimum premium requirement regardless of construction cost inflation, Bauer and Yovino explained, so the upfront savings may never materialize. A project that runs over budget and over time generates additional premiums from both cost overruns and policy extensions at audit.
"Mitigating this at the outset with the tools currently available can mitigate these 'surprises,'" they said.
