Matt Honea, Acrisure’s construction director for the western United States, is witnessing significant shifts in the construction insurance market across 14 states, including high-risk areas like California, Arizona, and Washington. According to Honea, rising auto insurance rates, wildfire damage, and an increase in construction defect lawsuits are making coverage more difficult and costly to secure.
Insurance providers are tightening terms and becoming more selective, particularly for large-frame and multifamily projects. Honea notes that projects over $10 million often require layered insurance programs that include excess and surplus carriers, but fewer are willing to take on these risks. To counteract these challenges, some builders are turning to technology like AI-powered monitoring systems and onsite sensors for fire, water, and theft to improve coverage terms, such as higher limits and lower deductibles.
Construction defect (CD) claims are another major concern, with lawsuits becoming more frequent and severe. The legal environment varies by state, but extended statutes of limitations and evolving court rulings are pushing insurers to raise premiums, reduce coverage, or even drop clients. These conditions heavily affect for-sale residential developments, where class action suits are increasingly common. As a result, some developers are shifting focus from condos and tract homes to apartment buildings.
Subcontractor performance and surety bonds are also facing stress due to ongoing labor shortages and lingering effects from COVID-era supply chain disruptions. Defaults among second-tier trades—those indirectly contracted but still tied to payment bonds—are causing headaches for general contractors, who end up liable for these failures.
Despite these hurdles, Honea sees promise in AI for improving risk management. AI tools are being used to verify subcontractor insurance and monitor policy compliance more accurately than human eyes. While currently used mainly behind the scenes, such technologies are expected to become client-facing services soon, offering construction firms new ways to manage risk.
Looking ahead, Honea is cautious about the market improving anytime soon without bigger changes. He points to litigation as a major barrier to solving housing issues, saying the combined pressures of expensive insurance and stricter legal and regulatory environments will keep making coverage more limited and costly. He calls for collaboration among all parties—insurers, developers, and trial lawyers—to create solutions.
Meanwhile, Acrisure is expanding its services beyond insurance policies alone. The company is offering help with claims, safety, legal education, and technology to support clients through this tough market. Honea says they want to be more than brokers; they aim to be trusted partners, much like accountants or lawyers, helping construction clients succeed in many areas beyond just insurance.