Conditions in the construction material damage market are continuing to improve; though perhaps not to the same extent as experienced in other insurance classes such as casualty.
There is increased appetite from insurers old and new who are either entering or re-entering the market after withdrawing over the past 5 years. Premium rates have fallen between 5 to 15 per cent over the past 6 months, particularly for well risk-managed customers. Insurers remain diligent in relation to requests for risk information particularly on single project risks. Contractors with lower hazard activities and positive claims records continue to be preferred by insurers, and this is reflected in the terms and conditions achieved for those policyholders. In the sub $10M turnover market competition is fierce, driven by new market entrants and existing markets vying for what is considered to be lower hazard businesses.
Policyholders who have not invested in risk management, engage in high hazard construction activities and have poor claims records are not seeing significant reductions or improvements to their terms.
There remains a preference for Australian insurers, underwriting agencies and Lloyd’s of London to seek proportional participation on project placements. This is a continuing trend for insurers who prefer to reduce the likelihood of being exposed to large full limit loss on both single projects and annual placements where a larger limit is required. This proportional approach leads to longer lead times for advisors to negotiate consistent coverage on placements for policyholders as underwriting information is now being analysed in detail across the commercial, industrial, and residential sectors by insurers.
In relation to sub limits of liability applicable to losses, advisors and policyholders need to consider their actual exposure to ensure that their insurance cover is adequate for their specific needs. In softer market conditions, insurers were willing to accept a simple percentage of sum insured to apply to sub limits. However, they now wish to discuss their exposure prior to releasing such additions. Our recent article in relation to this trend can be found here.
The shortage of experienced construction underwriters in the market continues. This has led to several movements within the market, as insurers and MGA’s compete for talent. This instability creates opportunity for customers as underwriters seek to pursue opportunities for new business via their old portfolio of policyholders which can result in downward pressure on pricing.
We continue to experience delays in responses from insurers, due to workload volumes and the shortage of experienced underwriting individuals. This becomes more prevalent in a softening market as some risk advisors seek cheap quotes from multiple insurers to “block the market”.
Lloyds of London are showing increased interest in the Australian marketplace. Whilst we previously noted that the local insurance market is more competitive, this is beginning to shift. Recent pricing and terms received from overseas markets are occasionally catching local holding markets by surprise, and we expect over the coming months that Lloyds will become a big threat to local carriers. Lloyds are also supporting new MGA’s to deploy construction capacity to the local market. As noted above, the unavailability of experienced underwriters could lead to poor performance of these facilities over time.
High rise residential construction
Increased activity in this sector continues.
Developer and contractor experience is one of the key underwriting considerations for insurers and an ability to demonstrate experience on similar projects, project history, operating history, company structures and use of contractors/consultants are all assessed as part of their review.
Longer project timeframes are becoming commonplace and insurers are taking a good look at project Gantt charts when considering project risk and actively questioning timelines which appear too optimistic. Contractors should ensure that they carefully consider their project timeline when approaching the market to avoid significant additional costs associated with policy extensions required due to delays in completion.
We have noted repeated delays to single projects due to longer construction lead times, and delays by regulators in issuing Occupation Certificates. This can lead to gaps between actual completion and the end of the policy period. In this type of scenario, insurers are effectively exposed to a 100 per cent loss whilst the building is vacant and awaiting the issuing of the Occupation Certificate as Strata insurance cannot be arranged until this is done. This necessitates extensions to cover and additional premium costs. See our article here for further detail.
iCert ratings are also considered in a positive light by some insurers. We should caveat that obtaining such a rating only provides insurers with confidence in the financial stability of the contractor and does not replace the need to demonstrate sound risk management.
Structural Defects Insurance (or LDI) is gaining momentum in the market. Regulators are considering changes which could make the proposition of LDI cover more attractive to contractors and developers. At the same time, carriers are looking to expand the breadth of coverage provided by their products to affording further protection to policy holders. This could result in LDI becoming more prevalent over the coming months.
Reforms and the scrutiny of poor work practices by the Building Commission in NSW has provided insurers with more confidence in project delivery. Enforcement action by regulators has eased, however, consumer sentiment has improved in relation to the perception of quality in this sector.
Insurer appetite for high rise residential construction is very dependent on the individual project and the participants. Where a strong submission is supported by experienced developers and builders, contractors can expect improved terms of pricing, coverage and deductibles.
Insolvency risk
We have seen a reduction in developer and builder insolvency over the past 6 months, which is a reversal of the trend experienced throughout much of 2025. However, insolvency risk continues to be an active consideration for insurers. Material damage insurers continue to undertake some financial due diligence on proposers prior to providing them terms.
Water damage
Claims for water damage continue to rise in both frequency and value on insurers’ loss records, most recently there has been a significant loss in Southeast Queensland as a result of water damage in a luxury apartment building nearing completion. These claims often arise from burst plumbing or failing fire suppression systems which in turn, cause damage to the remainder of the works.
Insurers are now asking for detailed risk management plans as part of submissions by contractors. Contractors are required to have in place a water management plan, and on larger projects physical water damage prevention measures to avoid the escape of water from new plumbing fixtures. Contractors should consider how they intend to manage water damage claims during project delivery.
Infrastructure/civil projects
Major projects continue at both state and federal levels, including tunnelling works and large static infrastructure builds. In the short term, the increased focus on Queensland is drawing labour and specialist resources from other states, creating capacity constraints nationally.
Most of these projects are still insured on a principal arranged basis, with cover placed by the State Authority on behalf of the contractor. This requires insurers to price the project before knowing the successful contractor or Joint Venture, leading to more detailed scrutiny of project design, methodology, and risk controls, as they cannot fully underwrite the delivery team at placement.
Subcontractors are increasingly seeking contractual indemnity under principal arranged policies. While generally available, the deductibles on these programmes can be significantly higher than subcontractors are accustomed to, often exceeding $750,000. As a result, many still prefer to rely on their own annual policies, and some may explore deductible buy-down options, though pricing varies considerably as insurers see greater exposure to smaller losses.
The complexity and scale of infrastructure projects continue to rise. The NCIF has highlighted the issue of “projectification,” where the pool of contractors capable of tendering for these mega projects is shrinking. Insurers are responding with more conservative capacity deployment, often requiring a larger panel of both local and international markets (Asia and London) to complete each placement.
An increasing number of projects are adopting alliance contracting, which insurers generally view favourably from both a contract works and professional indemnity perspective.
Insurers are also closely examining latent condition risk allocation, particularly where ALOP or DSU cover is requested. More information on mitigating these risks can be found here.
Horizontal civil projects carry heightened exposure to weather-related perils. With extreme weather events becoming more common, insurers are taking a restricted position on flood, cyclone and bushfire limits. Contractors will need to provide detailed weather management and risk mitigation plans for underwriters’ review. In some cases, single project policies will require standalone top-up policies for individual peril limits.
Claims
We have observed a significant variance in claims outcomes across our portfolio. Whilst some insurers continue to provide excellent and swift claims services, others have performed poorly. This could be because of the shortage of talent mentioned previously (which extends to loss adjusting services), or as a result of the insurer seeking to reduce their loss ratios.
It is important that claims are a key consideration when determining your insurance partner. Given the current market conditions, there are opportunities for reductions in price, however your business will benefit more from a claim being resolved efficiently and quickly (allowing you to get on with the job) as opposed to a small premium reduction at renewal and a poor claims service.
Summary
We suggest a continued positive outlook for contractors over the next period. There are definitely great opportunities for improved pricing in the current market. As previously discussed, an inability to exploit these conditions will be due to a lack of time, and a lack of information. Contractors seeking improvement in their current policy coverage should take time to prepare comprehensive information and provide their risk advisor plenty of time for options to be explored.
It is difficult to obtain competitive, comparable pricing from the market unless there is enough lead time for advisors to engage and negotiate. Engagement with the market at least 2 months prior to expiry (even if this is without updated renewal information) is imperative to the renewal process and ensures potential markets are identified and are resourced to assist when presented with an underwriting submission for consideration. Customers should also consider how much time they need to consider the options provided.
As previously stated, Insurer selection remains key for the medium-term strategy of construction firms. Bellrock recommends partnering with a stable insurer (with a record of paying claims) and to seek enhancements to coverage and improved premium rates in the medium term by demonstrating sound risk management and low claims volumes as market conditions continue to improve over the next 12 months.
Our experience suggests reductions are achieved as market conditions improve without the need to break a long-standing relationship. Often the incumbent insurer will meet the market on pricing where they wish to retain good quality construction businesses. Remaining with an insurer over the long term will reduce the volatility experienced when market conditions change.
Having a strategy and setting medium term insurance goals in conjunction with your risk advisor will enable focused negotiations with the market, and result in improved outcomes which take advantage of the current market conditions.
Continue reading our full range of market updates:
- Insurance Market Overview: January 2026
- Claims
- Workers Compensation
- Corporate and Multinational Risk
- Construction, Property and Development
- Financial Lines
