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Rough, Ready, Resilient

The construction industry faced challenges during the pandemic, adapting supply chains and materials sourcing. Inflation and delays require thorough insurance planning. Brokers suggest flexibility for policy rates to navigate uncertainties. Resilience and adaptability remain key for future growth.

Wed June 25, 2025 - Northeast Edition #14
Lucy Perry – CEG CORRESPONDENT


COVID-19 forced construction contractors to rethink their approach to a multitude of issues, including insurance coverage for projects. Since investing in supply-chain visibility, vendor vetting and risk diversification, today the industry is better positioned for whatever comes next.   (Adobe Stock photo) Strategic shifts, such as sourcing domestic lumber while also facilitating cross-border steel flows, are likely to stick because the United States’ construction industry was able to adapt quickly without compromising profitability.   (Adobe Stock photo) Inflation drives many businesses to study the contractual process with their insurance providers.   (Adobe Stock photo) Scrutiny is critical today because a business could find itself suddenly dealing with much higher costs due to inflation, labor shortages or supply-chain hiccups.   (Adobe Stock photo)

When the COVID-19 pandemic hit, the construction industry was forced to work around a multitude of issues, from logistics nightmares to materials bottlenecks to the age-old shortage of skilled workers. But with brains and muscle, the industry's resilience prevailed. Today, the market faces similar challenges. But now, the market has the skills and experience to address whatever comes to pass.

"Post-COVID-19, there's definitely been a step-change in how contractors manage supply chains," Adrian Pellen told Insurance Business America magazine.

NFP's North America head of construction, he said the strides the industry took are being tested by renewed volatility.

The fact is, the pandemic forced contractors to drop the just-in-time procurement models, Pellen said in the magazine article. Instead, they invested in supply chain visibility, vendor vetting and risk diversification. Today, they're assessing vulnerabilities using AI, he said.

"Contractors are doing deep pre-qualifications of subcontractors, checking their financials and ensuring they're local enough to be reliable."

And on the material side, the industry overall is making efforts to diversify and domesticate sourcing. In both the United States and Canada, reshoring and nearshoring efforts are intensifying, Insurance Business America reported.

Adobe Stock photo

The United States has leaned into sourcing domestic lumber, particularly southern pine from the Southeast, while also facilitating cross-border steel flows with Canada.

"These are strategic shifts that are likely to stick," said Pellen, who added that the broader trend is about resiliency.

Chiefly, he said, it's about "being able to adapt quickly without compromising profitability."

Contracts Under Microscope

Inflation is creating its own worries for the construction industry, driving many businesses to study the contractual process with their insurance providers.

Back at NFP, Pellen noted that scrutiny is critical today because a business could find itself suddenly dealing with much higher costs due to inflation.

"So, there's a question of who shoulders that burden," he said. Also, price volatility has forced developers to stockpile materials.

While this strategy may hedge against future cost hikes particularly for steel and lumber, it also brings a fresh set of insurance challenges, said Pellen.

The shift away from the just-in-time model introduces storage risk, he said. "Stockpiling increases exposure to fire, theft and natural disasters."

As a result, contractors and their providers are now building those factors into their risk mitigation strategies.

Less visible but just as impactful are project delays, said Pellen. Cost spikes can halt procurement and push back completion dates, he said. That pushback in turn can trigger a cascade of insurance complications that can result in disaster for an unprepared contractor.

Pellen cited as an example builder's risk policies, which are priced based on expected construction value and set timelines. He explained that if a project is extended and material prices increase, the insurance premium also is likely to go up.

The bottom line is, these shifts are forcing insurers and clients alike to rethink how they price and structure insurance products, Pellen said. As a result, some contractors are exploring their options, such as automatic extensions or pre-negotiated terms for extended coverage.

"Insurance used to be around 1 percent of a project's value," Pellen told Insurance Business America. "Now it's closer to 2 percent or 3 percent, and in places like New York, it's hitting 10 percent. That has a massive impact on project viability."

Turning to Your Insurance Provider

With all these variables hitting the construction industry, it helps to have the ear of an expert. Insurers are more engaged than ever in helping clients find solutions, said Pellen. They're discovering ways to build flexibility particularly for long-term projects where prices can quickly change, he said.

Frankly, planning for volatility is the new normal and the key to success, added Pellen.

"We're advising clients to review their escalation clauses," he noted in the Insurance Business America article. "Many policies allow for 5 percent, 10 percent or even 15 percent increases. But on large projects, that may not be enough anymore."

As some insurers have pulled back, brokers have asked others to take larger shares of placements on infrastructure projects.

Adobe Stock photo

Darron Johnston, executive vice president of Amwins, said they may be asked now to take 20 percent to 30 percent.

"We're asking for more capacity from more players," which usually means increased coverage costs, he told Risk & Insurance magazine.

Finding adequate liability coverage for infrastructure projects has been a particular problem, per Aldo Fucentese, Liberty Mutual.

Chief underwriting officer for the practice serving large contractors, he said that has probably been the biggest pain in the market.

Insurers in the United States are shying away from writing the coverage in a class of business known for attracting litigation that sometimes results in huge awards.

Pellen said contractors and their insurance providers are negotiating for higher thresholds these days. Clients also are being encouraged to think longer-term when it comes to insurance coverage, he said.

"Delays are more likely, so we're asking whether it makes sense to place policies with automatic extension options or longer base durations," Pellen added.

Especially when it comes to public entity infrastructure construction, insurance providers have a vital role in protecting both the project and their client.

Contractors operating in an "uncertain market" require careful underwriting, Marcus Henthorn told Risk & Insurance.

The managing director of Gallagher, he said there are myriad "headwinds" that challenge infrastructure project launches. Proper coverage is one of them.

"I think one of the biggest is labor — there's a chronic shortage of labor across the country."

Construction labor shortages, along with inflation, supply-chain issues are among factors raising building costs and creating delays on some projects.

"It makes it harder for our clients to understand the true exposure, when [a project] is going to finish and what it's going to look like," Henthorn said. "That concern translates into the underwriting community."

So much so that public entities can't do without a willing and healthy insurance market. Without adequate coverage and a surety bond market to guarantee performance and payments, the risk to build would be too great, say experts.

"Insurance is absolutely critical," said Fucentese. "A lot of different lines come into play and if you don't have surety capacity, you can't even get started."

Finding coverage has gotten somewhat harder for contractors on large infrastructure projects.

According to Risk & Insurance, many on the provider side believe the picture is not one of total doom and gloom

Johnston believes tough times tend to create opportunities for insurers willing to commit capacity. That bodes well for contractors.

"Markets tend to step up," he said. So, as the public sector deals with the "heartburn," insurers are working to generate more capacity to support this space.

"We'd love to have more competition to ultimately deliver a better product to the client," Johnston said.

Industry Applauds Its Resilience

Because it's an economically sensitive sector full of risks and uncertainties, the construction industry, by nature, has no choice but to be resilient.

Writing for Smartbrief, Evan Milberg noted that "despite muddy conditions," the AEM marked its Celebration of Construction on the National Mall in May.

Despite labor shortages — Milberg noted that 45,700 job openings are projected annually — the industry has found reasons to collectively exhale.

Members of the AGC responded to a poll indicating that they were less concerned about tariffs than they were weeks prior.

Only 27 percent of respondents said they were more concerned, and 66 out of 107 said they had not felt pressure to expedite work because of concerns.

Further, AGC found in a May 15 poll, 57 percent of respondents indicated some level of support for the Trump administration's peak tariffs on China.

Contractors are concerned about equipment theft, which the American Rental Association said is a $100 million crisis annually for the rental industry. In fact, more than 360 machines disappear each month, the ARA reported, and many are stolen through fraudulent rentals rather than break-ins.

SmartBrief's Milberg wrote that rig thieves have been known to pose as legitimate customers, using false identities to obtain equipment they quickly resell. This quick-flipping leaves little chance of recovery for the equipment owner and is why ARA launched its Equipment Rental Guard ID verification program.

At its construction celebration the Associated Equipment Manufacturers stressed how vital the industry is to local and state economies.

SmartBrief noted that the U.S. equipment manufacturing industry supports 2.3 million jobs and contributes roughly $316 billion to the economy every year. At the same time, it generates $714 billion in total output and $47 billion in tax revenue, according to AEM.

Its economic impact is felt nationwide, and the ripple effect extends through manufacturing, the supply chain and consumer spending from employee wages.

On average, employees in the industry earn $89,700 annually, according to the SmartBrief article.

Pellen of NFP believes while the road ahead for construction is uncertain, the industry will navigate forward.

Sharper focus on supply-chain management, more sophisticated insurance planning and a willingness to adapt new contracts and strategies can only help, he said. CEG


Lucy Perry

Lucy Perry has 30 years of experience covering the U.S. construction industry. She has served as Editor of paving and lifting magazines, and has created content for many national and international construction trade publications. A native of Baton Rouge, Louisiana, she has a Journalism degree from Louisiana State University, and is an avid fan of all LSU sports. She resides in Kansas City, Missouri, with her husband, who has turned her into a major fan of the NFL Kansas City Chiefs. When she's not chasing after Lucy, their dachshund, Lucy likes to create mixed-media art.


Read more from Lucy Perry here.





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