2026 Construction mid-year state of the market

As the construction industry moves into the second half of 2026, market conditions continue to vary significantly by sector. While overall construction spending is expected to post modest growth this year, much of that activity is concentrated in digital infrastructure, power generation, healthcare, public education, and infrastructure projects.

Summary

Other segments, including commercial, industrial, and residential construction, continue to face pressure from material cost inflation, labor shortages, supply chain uncertainty, and elevated borrowing costs. Notably, even construction in the higher education space, which has traditionally been resilient through times of economic uncertainty, has slowed considerably in many areas of the country.

Despite these challenges, the industry has demonstrated resilience. Strong demand for data centers, energy infrastructure, and other large-scale projects has helped sustain growth across much of the country, offsetting slower activity in more challenged sectors. Adaptive reuse projects and continued investment in infrastructure and power capacity are also creating new opportunities in select markets.

For the construction insurance market, robust competition continues to provide a stabilizing force amid broader economic uncertainty. While certain lines, particularly commercial auto liability and umbrella liability, remain challenged by loss severity and capacity constraints, many segments of the insurance marketplace remain competitive, well-capitalized, and actively seeking construction business.

As contractors, developers, and project owners navigate an increasingly segmented market, strategic risk management and thoughtful insurance planning remain essential. The Baldwin Group partners with construction firms to navigate evolving market conditions, strengthen risk-management practices, optimize program structure, and align insurance strategies with the operational, contractual, and project-specific realities shaping today’s construction environment.

Current trends

Workers’ compensation

Workers’ compensation remains one of the most stable lines for contractors, supported by strong underwriting performance and continued market competition. NCCI reported a 91% combined ratio for 2025, marking another year of profitability for the line.¹ Barring adverse loss experience or expansion into higher-risk operations, most contractors can expect stable pricing and favorable market conditions through the remainder of 2026.

General liability

General liability outcomes continue to vary significantly based on contractor operations, project type, and geography. While most contractors are seeing flat to low single-digit rate increases through 2026, those with favorable loss experience and strong risk controls may be able to capitalize on robust market competition and achieve modest rate relief.

Market conditions remain considerably more challenging for higher-risk classes and contractors operating in jurisdictions with elevated litigation and loss severity trends. Additionally, several coverage exclusions have become standard as insurers continue refining risk appetite and exposure management strategies.

Underwriting considerations

• Higher-risk operations – Contractors engaged in residential construction, roofing, demolition, and curtainwall work continue to face a more limited insurance marketplace than their counterparts in other segments of the building sector. Heavy civil contractors, particularly those involved in highway, bridge, and tunnel construction, face even greater challenges as several major insurers have reduced capacity for these risks.
• Jurisdictional scrutiny – Geography remains a critical underwriting consideration. States including California, Colorado, Florida, Louisiana, Nevada, New York, Oregon, South Carolina, Texas, and Washington continue to attract heightened scrutiny due to litigation environments, loss trends, regulatory considerations, and claim severity.

Evolving coverage restrictions

• PFAS exclusions – PFAS exclusions have become standard across much of the general liability market as insurers direct environmental exposures to specialized pollution policies.
• Biometric privacy exclusions – Exclusions related to biometric privacy laws continue to expand as regulatory scrutiny and litigation activity increase.
• Wildfire exclusions – Once largely limited to the western United States, wildfire exclusions are becoming more prevalent nationwide, particularly for contractors operating in the civil, utility, and energy sectors.

Contractors with disciplined risk-management practices, strong quality-control programs, and thoughtful geographic diversification remain best positioned to secure favorable general liability terms in selective underwriting environment.

Commercial auto liability

Commercial auto liability remains one of the most challenging lines for contractors in 2026. Market conditions have shown little improvement through the first half of the year, with most fleets continuing to experience rate increases ranging from 5% to 20%, depending on loss experience and overall risk profile. As insurers contend with rising claim severity, litigation costs, and unfavorable underwriting results, underwriting scrutiny continues to intensify across fleets of all sizes.

Pricing and underwriting

• Premium pressures – Many contractors with larger fleets are evaluating higher deductibles to offset premium increases. Underwriting scrutiny is also expanding to smaller fleets and hired and non-owned auto risks.
• Fleet safety controls – Insurers expect formal driver-safety programs, motor vehicle record monitoring, and documented corrective-action procedures. Contractors with strong safety cultures and consistent oversight are best positioned to manage rate pressure and maintain favorable market standing.

Strengthening fleet-risk management

• Turning data into action – Telematics and dash cameras give contractors greater visibility into driver behavior and fleet performance. While these tools can surface unfavorable evidence when unsafe behaviors go unaddressed, insurers generally view the benefits as outweighing the risks. Organizations that use real-time data to drive coaching and corrective action are better positioned to demonstrate active fleet management and improve loss performance.
• Hired and non-owned auto exposure – Underwriters are placing greater emphasis on hired and non-owned auto exposures. Employees who use personal vehicles for business purposes, including those receiving vehicle allowances, are more frequently expected to meet the same driver-screening, safety, and driving-record standards as operators of company-owned vehicles.
• Claim defense – Detailed telematics data and video evidence can help dispute liability allegations and defend against fraudulent or staged accidents, making these technologies an important component of fleet-risk management.

Contractors that combine strong leadership engagement, documented fleet-safety programs, telematics-driven oversight, and proactive management of hired and non-owned auto exposures remain best positioned to mitigate loss costs and navigate a challenging commercial auto market.

Cyber liability

The cyber insurance market for contractors remains stable but increasingly selective, with underwriting focused on access controls, vendor management, incident-response planning, and jobsite-technology security. As construction firms adopt more connected technologies and digital tools, cyber risk has become a mainstream business exposure. Cyber incidents can trigger operational delays, contractual disputes, and financial loss, making cyber resilience crucial across the industry.

• AI-enabled attacks – Business email compromise schemes have evolved through AI-generated content, deepfake audio, and other impersonation tactics targeting payment workflows, vendor relationships, and subcontractor disbursements.
• Ransomware attacks – Ransomware remains a significant threat due to the high cost of downtime. Locked project files, delayed schedules, and data theft can disrupt multiple projects and stakeholders.
• Connected jobsite technology – Cameras, drones, access-control systems, wearables, and other connected devices continue to expand the construction attack surface as jobsite digitization accelerates.
• Supply chain risk – A cyber event affecting a vendor, software provider, subcontractor, or cloud platform can create contractual, operational, and financial consequences across multiple projects.
• Payment fraud – Unverified banking changes, compromised credentials, and weak access controls are among the most common drivers of cyber losses, particularly within vendor-payment, accounts payable, and accounts receivable workflows.
• Strengthening cyber readiness – Contractors that strengthen access controls, secure jobsite technologies, improve data governance, and establish cybersecurity standards for third-party partners are often better positioned to secure favorable coverage outcomes. Tested incident-response plans, offline backups, and payment-verification procedures remain critical.

Cyber liability insurance remains an important component of business resilience, providing both financial protection and access to specialized pre-breach and post-breach resources. Contractors that leverage insurer-supported services such as vulnerability assessments, cyber-risk monitoring, and incident-response planning can strengthen their security posture and reduce operational disruption.

Umbrella and excess liability

Umbrella and excess liability remain among the most challenging lines for construction firms in 2026. While capacity remains available, insurers continue managing aggregate exposure through selective deployment, particularly for contractors with complex operations, challenging loss histories, or significant fleet exposures. Construction firms with strong safety performance, contractual risk-transfer practices, and disciplined claims management remain best positioned to secure favorable pricing, capacity, and program structure.

• Legal system abuse – Nuclear verdicts, escalating defense costs, and litigation funding are pressuring underwriting results and driving stringent risk evaluation.
• Jurisdictional exposure – Conditions remain particularly challenging in California, Florida, New York, and Texas, where plaintiff-friendly legal environments continue to fuel a disproportionate share of large verdict activity.
• Selective capacity deployment – Most insurers limit participation to $5 million to $15 million per risk, with larger limits generally reserved for contractors with strong controls, favorable loss experience, and lower-hazard operations.
• Higher minimum premiums – Capacity discipline is also contributing to higher minimum premiums, even on upper excess layers, as insurers seek adequate returns on volatile liability portfolios.
• Tower construction – Large excess programs often require participation from a broader range of domestic and international markets. Structuring high-limit towers has become more complex, requiring careful coordination to balance pricing, capacity, and coverage objectives.

Contractors that proactively evaluate limit adequacy, maintain strong risk controls, and engage the market early remain best positioned to secure stable excess liability protection in a capacity-constrained environment.

Contractors pollution liability

Contractors pollution liability remains one of the most stable segments of the construction insurance market, supported by abundant capacity, strong competition, and favorable underwriting conditions. Rates, retentions, and coverage terms remain largely stable across both corporate and project-specific placements. Contractors that maintain clear scopes of work, strong environmental controls, and disciplined operational practices remain well positioned to secure favorable outcomes.

Contractors professional liability

Construction professional liability markets remain generally stable, supported by healthy competition and new market entrants. However, the market for contractor professional liability products — including contractors professional protective indemnity (CPPI), A&E professional, owners professional protective indemnity (OPPI), and project-specific professional liability (PSPL) — remains more dynamic than many other construction insurance lines.

While rates are generally stable, typically ranging from flat to 5%, underwriting results, project complexity, loss experience, and design responsibility continue to drive meaningful differences in pricing, capacity, and coverage terms.

Market dynamics

• Market segmentation – Contractors with adverse loss experience, residential exposures, or highly engineered civil projects continue to face greater pricing volatility and underwriting scrutiny.
• New market entrants – While some insurers are raising attachment points and tightening select terms, new market entrants are helping maintain overall market stability and competitive conditions.

Complex project considerations

• Data center and power generation – Rapid growth in data centers, power generation, and emerging nuclear projects is increasing demand for project-specific CPPI and OPPI coverage. Design-build contractors and project owners are often competing for capacity from the same insurers, which generally will not write both products on a single project, making early market engagement crucial.
• Pollution programs – When separate pollution programs are required for owners or contractors, insurers that participate in both professional and pollution placements may cap their total project capacity at approximately $25 million, creating additional capacity challenges on large and complex projects.
• Design responsibility scrutiny – Contractors performing in-house design or assuming greater design responsibility continue to attract heightened underwriting scrutiny. For CPPI placements, the amount of design work performed by the contractor can significantly impact the economics of the program, including retentions and deductibles.

Placement strategy

• Limited PSPL market – Project-specific professional liability remains a highly specialized market with only a few insurers offering primary capacity. Limited competition contributes to greater pricing volatility, with PSPL rates often reaching two to three times those of comparable OPPI placements.
• Early underwriting engagement – Project delivery methods, contractual requirements, insurance specifications, and limitations of liability remain critical underwriting considerations. While insurers may provide early indications with limited information, greater clarity upfront can help reduce changes to pricing, terms, and capacity as project details evolve.

Contractors that clearly document design responsibilities, maintain disciplined quality-control procedures, and engage insurers early in the project-development process remain best positioned to secure favorable professional liability outcomes.

Builder’s risk

Builder’s risk market conditions remain highly dependent on project type, location, and loss history. While competition remains healthy across much of the market, insurers continue to apply greater scrutiny to catastrophe exposure, project complexity, and loss-control measures. Contractors that engage insurers early and clearly articulate project controls, construction methods, and risk-mitigation strategies remain best positioned in the market.

Underwriting trends

• Wood-frame improvement – Wood-frame construction has improved significantly over the past two years as enhanced site-protection requirements have helped reduce claim frequency and severity. While risk-mitigation tools, such as electronic surveillance, remain common, broader insurer participation and expanded approved-vendor options are helping improve competition and moderate pricing.
• Severe convective storms – Following several years of elevated losses, underwriters now evaluate SCS exposure through the same lens as named-storm risk. Wind-related scrutiny now extends to more regions of the country, with heightened focus on site protection, temporary works, and loss-mitigation planning.
• Underwriting focus – Phased project delivery, permission to occupy, and LEG III coverage continue to drive more extensive underwriting discussions.

Capacity and placement

• Commercial capacity – Insurers continue managing line size more conservatively on large commercial projects, making layered and shared placements more common across risks that previously required fewer participating markets.
• Global capacity considerations – The London market has softened relative to the U.S. market for many large and complex builder’s risk placements. As a result, accessing global capacity has become increasingly important for securing optimal pricing, capacity, and coverage terms.

Organizations that demonstrate strong project controls, detailed risk-mitigation planning, and clear communication around project design and delivery remain best positioned to secure favorable builder’s risk outcomes.

OCIPs, CCIPs, and project-specific liability programs

The market for project-specific liability programs — including OCIPs, CCIPs, owner/GC programs, owners interest, and joint venture liability programs — remains highly competitive. While primary and lead excess underwriters continue to deploy capacity selectively, competition remains strong across most sectors, particularly in the mid- and upper-excess layers. Well-structured projects supported by detailed underwriting submissions continue to achieve favorable pricing and program flexibility.

Program structures

• General liability-only OCIPs – GL-only OCIPs continue to dominate the market, allowing owners to secure broad project liability protection without the long-term collateral obligations associated with traditional two-line structures. The market remains highly competitive from both a pricing and coverage standpoint. Separate workers’ compensation CIPs remain available on many larger projects, often secured by the contractor to complement GL-only placements.
• Rolling program considerations – While true open rolling programs remain difficult to secure, owners and general contractors with a strong pipeline of upcoming projects are often better positioned to achieve favorable market outcomes.

Higher-risk placements

• New York challenges – New York remains one of the most challenging markets, as it is the only jurisdiction where general liability wrap-ups with contractual risk transfer are largely unavailable. Owner/GC programs have become the primary E&S solution for project owners and general contractors seeking to avoid multi-million-dollar retentions. Careful review of subcontractor warranty provisions remains essential to prevent project disruption and avoid unintended coverage gaps.
• For-sale residential projects – Appetite remains limited for for-sale residential developments, particularly in high-risk construction defect states including Florida, South Carolina, Texas, Colorado, California, and the Pacific Northwest. Even for-rent projects attract heightened underwriting scrutiny in these jurisdictions.

Coverage considerations

• Course of Construction (COC) exclusions – COC exclusions continue to expand within GL-only programs as insurers shift first-party property damage to builder’s risk policies. Even well-crafted endorsements can leave significant gaps when general liability and builder’s risk are not carefully aligned.
• COC exclusion impacts – Broader exclusionary language now extends beyond real property under construction to any property, potentially leaving contractors without coverage for damaged equipment or other property excluded under builders risk, creating significant uninsured balance-sheet exposure.
• Coverage coordination – Aligning builders risk and general liability coverage is crucial, particularly for phased projects where broader exclusionary language can create unintended coverage gaps.

Preparing for placement

• Submission quality – Project-specific placements require thorough preparation. Detailed hard cost budgets, schedules, site plans, geotechnical reports, and building condition reports are essential to achieving favorable pricing and terms. Sponsors should also plan for longer marketing timelines, as large excess towers now require participation from more markets than ever.

Project teams that coordinate wrap-up, builder’s risk, and contractual risk-transfer strategies while engaging insurers early remain best positioned to secure favorable project-specific liability outcomes.

Market spotlight: New York construction

Insurance conditions for New York construction remain among the most challenging in the country. Insurer appetite continues to be shaped by New York Labor Law exposure, legal system abuse, auto liability severity, and persistent underwriting challenges, leaving many contractors dependent on the excess and surplus market for critical capacity. While several recent legislative reforms are intended to address long-standing legal and development challenges, their full impact on construction risk and insurance costs will take time to unfold.

Market conditions

• Excess liability constraints – Limited lead-layer capacity continues to drive excess market hardening. Large projects often rely on fronted general liability programs as fewer insurers are willing to assume significant aggregate risk.
• Alternative dispute resolution (ADR) – ADR continues gaining traction as owners and project sponsors seek to better manage total cost of risk amid significant deductible obligations often required on New York project programs.

Legislative developments

• Auto legal reform – Governor Kathy Hochul signed New York’s 2026 auto legal reforms into law in May 2026 to combat widespread fraud within the state’s auto insurance system.² Although the insurance impacts will take time to materialize, the reforms represent a positive step toward slowing rising auto insurance costs.
• Affordable housing acceleration – Following voter approval of the Expedited Land Use Review Procedure (ELURP) in late 2025, New York City has begun accelerating affordable housing approvals by bypassing City Council review, reducing review timelines from more than seven months to roughly 90 days. With the first ELURP project approved in early 2026, an 84-unit development in the Bronx, and the Affordable Housing Fast Track initiative launching in 2027, pre-development timelines are expected to decrease by more than two years.³
• AVOID Act – The New York AVOID Act, effective April 2026, amended CPLR § 1007 by imposing strict deadlines for third-party claims in construction litigation. Defendants now have 90 days after serving an answer to file contract-based third-party claims, and 90 days from learning another party may share liability to file non-contract claims. New third-party actions are generally barred after the Note of Issue, with extensions requiring court approval. Owners, general contractors, and subcontractors must now evaluate contractual indemnity, additional insured tenders, and other risk-transfer strategies much earlier in the litigation process. Missing the 90-day deadline can prevent subcontractors from being joined to the underlying action, forcing upstream parties into separate, costly litigation.⁴

Contractors and project sponsors that proactively evaluate program structure, strengthen contractual risk-transfer practices, and adapt to New York’s evolving legal environment remain best positioned to secure capacity and navigate long-term project risk.

Market spotlight: Florida construction

Florida construction insurance market conditions continue to vary significantly by project type. While capacity remains healthy across much of the commercial construction market, for-sale residential development continues to experience elevated pricing, constrained capacity, and heightened underwriting scrutiny. Though recent tort reform measures have begun reshaping Florida’s legal environment and may influence long-term insurance trends, construction defect litigation remains a primary driver of market conditions.

Market conditions

• Residential market divergence – Florida’s insurance challenges remain concentrated in for-sale residential construction, not the broader market. Insurance for condominium projects is pricing approximately 25% higher than other CD-1 states (CA, NV, AZ, CO, TX, FL, HI, SC) and roughly three times the cost of comparable apartment developments.
• Capacity divergence – Capacity remains extremely limited for for-sale condo construction, with approximately six general liability wrap markets collectively providing roughly $135 million in available capacity for active projects valued at more than $500M. Underinsurance is a real and growing concern in this segment. In comparison, the for-rent/apartment market is healthy, with $200M+ in available capacity for the segment.
• Pricing drivers – Pricing pressure remains specific to for-sale residential and new condominium construction, not the broader Florida market. No other CD-1 state is experiencing the same level of pricing pressure for new for-sale residential construction, as more established case law and predictable claims outcomes support greater market stability elsewhere. Florida Chapter 558 continues to be the primary driver of these conditions.
• Course of Construction pressures – The broader wrap-up market remains robust across residential, commercial, industrial, infrastructure, and transportation projects, with strong competition from both standard and specialty insurers. However, COC losses continue to accumulate on CIPs that were priced too aggressively, while project values are growing faster than available limits. As a result, COC exclusions on CIPs remain one of the most significant pressure points for GL-only wrap programs.
• Renovation and conversion challenges – Residential remodels continue to have little to no access to project-specific coverage and typically rely on repair and remodel provisions within standalone policies. Project-specific markets for condominium re-roofing remain scarce, and where available, pricing is often uneconomical. Commercial-to-condominium conversions remain among the most difficult placements in the market, typically requiring a PCAR while attracting extremely limited insurer appetite.

Florida Chapter 558

• Construction defect litigation – Florida Chapter 558 requires property owners to notify contractors, subcontractors, and design professionals of alleged construction defects before filing litigation, providing an opportunity to inspect, remedy, or settle claims outside of court. While designed to encourage early dispute resolution, Chapter 558 is a significant driver of condominium GL-only wrap pricing.
• Claim severity – The examples below illustrate the financial impact of Chapter 558 claims across primary indemnity, excess indemnity, and associated defense expenses. Together, they highlight the substantial costs associated with Florida construction defect litigation and why Chapter 558 continues to be a significant driver of condominium general liability-only wrap pricing.

Tort reform developments

Florida’s 2023 tort reforms continue producing measurable changes across the state’s insurance and legal environment. Reductions in litigation frequency, defense costs, and nuclear verdict activity are beginning to improve market conditions and strengthen insurer confidence. As these reforms continue to demonstrate measurable insurance and economic benefits, Florida is emerging as a high-profile proof of concept for litigation reform. Other states, including Georgia, Louisiana, and potentially New York, are pursuing similar legislation in an effort to reduce litigation costs and improve long-term insurance affordability.

Florida tort reform, by the numbers

• Consumer returns – USAA is returning nearly $1B to eligible Florida members, including a $500M dividend averaging approximately $760 per policyholder, citing the 2023 tort reforms as a key driver.
• Auto glass litigation – Auto glass lawsuits have declined approximately 83% following the reforms.
• Defense costs – Insurer legal defense costs fell from $3.46B to $107M.
• Nuclear verdicts – Florida dropped from 2nd to 10th nationally in nuclear verdict payouts.
• Auto insurance savings – Average Florida auto insurance rates declined approximately 14%.
• Broader insurance savings – Property and casualty insurance costs are estimated to be 14.5% lower than they would have been absent the reforms.
• Economic impact – The reforms are projected to generate $4.2B in annual gross product, support approximately 29,000 jobs, and produce more than $360M in combined state and local tax revenue.
  Source: CNBC⁵

Contractors, developers, and project sponsors that understand Florida’s segmented market, engage insurers early, and tailor program structures to project-specific exposures remain best positioned to secure favorable capacity and navigate evolving market conditions.

Turn insight into action

As construction firms navigate a multifaceted, segmented market, evolving project delivery models, and growing contractual and regulatory complexity, the value of a strategic insurance partner has never been clearer. The Baldwin Group helps contractors, developers, and project owners strengthen their risk posture through proactive planning, disciplined risk management, and insurance strategies aligned with operational realities. By combining deep construction expertise with tailored program design, we help organizations secure capacity, navigate complex exposures, and build resilience that supports successful project delivery and long-term growth.