Builder's Risk Market Sees More Capacity for Large-Frame Construction

The Builder's Risk insurance market has experienced significant shifts over the past year, according to RPS Broker/Account Manager Will Buckley. After years of restricted capacity and challenging placements, particularly for large-frame construction projects over $25 million, the market has opened up.

"It's been a challenging market for frame projects during the last five years," Buckley explains. "However, by mid-summer 2024, carriers began to provide more capacity, and competition is increasing."

Fewer Carriers Needed to Insure a Project

This shift marks a significant change from previous market conditions when securing Builder's Risk coverage for large projects required multiple carriers to offer small portions of the total coverage.

"Now, if the exposure is right, we can see carriers offer up to $20 million or more, sometimes allowing a project to be covered by a single carrier or just two," Buckley notes. Strenuous requirements and terms that were standard over the last few years have allowed for more capacity in the marketplace as well, leading to further competition.

Underwriting standards, which tightened significantly during tougher market conditions, have also begun to relax — but only to a certain extent.

"With more competition, we're seeing flexibility on some items that were previously common in the marketplace. Strong site security measures and risk-mitigation measures, such as fire protection and loss prevention planning, remain central to underwriting decisions," says Buckley.

Challenges Continue in Catastrophe-Prone Areas

While the Builder's Risk market has improved, challenges remain, particularly in catastrophe-prone regions.

"If there's wildfire, earthquake, flood or windstorm exposure, capacity can still be restricted," Buckley emphasizes. In these high-risk areas, insurers continue to require special deductibles and sub-limits to mitigate potential losses. There are alternative markets that can support the missing capacity for catastrophe perils on a project, but that capacity is limited and can drive up the total cost of the project.

Renovations involving existing buildings also remain challenging.

"You're not just dealing with new construction," Buckley explains. "If something goes wrong, a whole completed building is at risk, beyond just the construction work — which is a large exposure for insurers."

The evolving market landscape presents both opportunities and considerations for brokers and clients navigating Builder's Risk insurance. With capacity more readily available and pricing becoming more favorable, brokers and clients still need to approach the market strategically, particularly in high-risk regions and complex renovation projects.

"It's a different landscape than what we saw just a year ago, but it still requires careful navigation," Buckley says. "A great deal of detail is required with each submission. We work to address and guide our clients at the start of our review process so we can help streamline the underwriting process."