Hard Property Market, Slowing Economy Complicate Builder’s Risk

Turmoil in the property market, higher interest rates, and a slowing economy are complicating the Builder’s Risk market. Capacity is available but with higher deductibles and stronger risk mitigation requirements. Increasingly complex placements require skilled brokers with strong market relationships to get the job done.


Builder’s risk has weathered much of the storm winds buffeting the property market, but capacity constraints and heightened concerns about catastrophe losses are still having an impact. As carriers focus on managing aggregations in property, particularly after Hurricane Ian caused an estimated $60 billion in insured losses,1 they’re also being more selective with capacity for builder’s risk and imposing stricter underwriting criteria. Non-catastrophe capacity is available, but along with the rest of the property market, reinsurance rates have pushed pricing/annual rates up. Florida/Tier 1 wind capacity remains hard to come by, and many markets are pushing to see a Named Wind Storm (NWS) sublimit or are limiting capacity to $5M-10M lines. The London market has recently begun writing certain Florida projects again but is also limiting line size, making these larger frame projects harder to fill in. Insureds continue to see higher retentions and heightened requirements for security and water damage mitigation. Placements have become more complex as lower available limits and higher project values require more quota-share participants. Successful submissions also require more detailed information on the project, the contractors, and active risk control measures. In a complex marketplace, knowledgeable brokers with a deep understanding of the risks involved and strong relationships with markets can help insureds obtain the optimum coverage.

Total construction spending rose 4.3% in the first three months of 2023 to $403.3B from $386.7B in the first quarter of 2022.4


After a robust 2022, the construction market now faces rising interest rates, an economy on the brink of recession, and long-term trends that may reduce demand for office space. Gains in construction spending in the first quarter came even as starts were tapering off. The Federal Reserve’s interest rate hikes, totaling nearly 5 percentage points since 2022,2 make residential mortgages as well as construction and commercial real estate loans more expensive. At the same time, office vacancy rates are rising amid layoffs, including tens of thousands of technology workers in urban areas where vacancies have been climbing. Tens of billions of dollars of commercial real estate loans will mature over the next two years but lower occupancy and higher interest rates may complicate refinancing. In some cases, loans for renovation may now exceed the current value of the commercial properties.

Builders also face higher material and labor costs. The supply chain logjam of two years ago has eased and lumber prices have decreased, but the aftereffects continue to impact construction. In some areas, such as Seattle which endured a three-month concrete strike, project delays due to supply chain and other issues necessitate policy extensions, which require significant groundwork by brokers and their insureds in advance.

About 30% of the U.S. workforce now works from home, compared to just 5% before the pandemic.6


Softening economic trends complicate the builder’s risk market, which is feeling the effects of turmoil in the property market and the hardest reinsurance market in decades. Years of catastrophe losses, including Hurricane Ian—the second costliest hurricane after Katrina—have driven carriers to focus tightly on managing aggregates and limiting risk in wind- exposed areas. Those imperatives carry over into builder’s risk as well. In addition, capital providers are paying more for reinsurance where property renewal rates continue to climb. The impact is being felt across insurance lines. When the largest property, casualty, and auto insurance provider in the United States announced in May that it would stop accepting new applications on all business and personal lines property and casualty insurance in California, it cited, “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure and a challenging reinsurance market.”3

Catastrophe-exposed building projects are not seeing the same intensity of increases as property, but markets are charging more, depending on the risk, as well as increasing deductibles, and offering lower limits. Florida and the Gulf Coast remain challenging, but insurers are increasingly cautious about the entire Eastern Seaboard as property values and aggregations mount in areas that haven’t experienced severe hurricanes in recent decades. Wind-exposed projects should expect significant increases, particularly in Florida, along the Gulf Coast and the Eastern Seaboard. Carriers may also consider project timing, since an 18-month project that starts in June could experience two hurricane seasons. It's not only hurricanes; insurers have become more restrictive around convective storm, earthquake, flood, and wildfire exposures. They might offer narrower coverage in some lines. For instance, a carrier may offer coverage only for seismic earthquake and not earth movement. Or, when obtaining a full fire limit on a large project, there is often only enough NWS capacity available to achieve reduced sublimits.

Generally, capacity is available from existing markets, new entrants, London markets, and reinsurers. Still, non- catastrophe exposed projects are viewed as more appealing. While a big driver on frame capacity, London markets remain reluctant on Florida and Tier One wind risks. However, carriers have scaled back the limits they’re willing to extend on any one project. That means more markets are needed for each placement. Leading MGAs writing builder’s risk have lost capacity and their capital providers are demanding better returns, higher retentions, and stricter security requirements.

Total construction starts declined 7% in the first four months of 2023, with residential starts down 27% as non-residential grew 7%.5


As values rise, projects are generally requiring more quota-share participants. Any project valued at more than $25 million is likely to be quota-shared, which means all the parties must agree to terms and conditions, which can make achieving concurrency difficult. Typically, all participants tend toward the strictest terms offered by any one market. In particular, multi-family frame construction remains more challenging with a limited number of markets that make sense in a lead position given available capacity, terms, and policy forms.


Deductibles pose the biggest challenge as carriers are increasingly seeking to manage their risks with higher deductibles, particularly for water damage as well as for all other perils (AOP) coverage. In some regions, carriers are seeking 1 percent deductibles for wind/hail instead of more traditional flat $100,000 deductibles. Carriers are also increasing waiting periods for soft costs, which have been extended to between 14 and 30 days.

While developers usually want full permission to occupy with temporary certificates of occupancy, some markets cannot provide such coverage over multiple months. Some carriers are also placing sub-limits on so-called LEG3 coverage, which provides broader coverage for damage caused by construction defect. Developers and insureds may seek to reduce total insurance costs with higher retentions, but that may not be possible on projects with heavy lender involvement. Requests for water damage and AOP buydowns are common, but less frequently purchased.


Fire losses and water damage at large frame projects have led to heightened scrutiny in underwriting as well as requirements for active mitigation measures to combat those perils. This is particularly true for podium-style projects where fire losses are often total, and which may be valued in the hundreds of millions of dollars for large projects in more attractive areas. There are no economies of scale with frame podium buildings as underwriters weigh the potential of a total fire loss. The impact of water damage claims has also spread beyond frame to better construction using steel and concrete.

Carriers may require the use of approved vendors to monitor security, water, and heat detection systems. In the current market, water mitigations and monitoring are often non-negotiable points. Security requirements have tightened and may include both in-person security and video monitored around the clock. Many carriers are requiring real-time third-party video surveillance on any project above $25 million.

Crime scores are being closely evaluated, particularly in urban areas undergoing renewal. Projects in some cities may require extra security measures and there may be limited markets available. Growing concerns across the country include arson as well as civil disturbance, scores into consideration in vulnerable areas. Besides the potential for arson-related losses, markets are also taking wildfire scores into consideration in vulnerable areas. With fire losses often viewed as preventable with heightened security and strengthened safety practices involving hot works, insureds should expect inspections not only from the lead markets, but also from other insurers on the placement. Insureds should view this as an attempt by carriers not only to manage their own exposure but also as loss prevention for the project owners or developers.

Fire departments responded to an average of 4,300 construction site fires, causing $376M in direct property damage annually, in 2016 -2020.7


Given higher insurance costs, more developers are assessing whether it would make more sense to build with more expensive steel and concrete rather than wood frame. Insurance on wood frame is four to five times higher than steel, but builders have to consider the costs of security and other measures required on frame projects. Among alternatives, Cross-Laminated Timber (CLT) projects are still viewed as new and some larger frame carriers cannot write such projects within their current guidelines. CLT may be viewed more favorably than traditional wood frame, but still does not have sufficient depth of loss data, including how such structures will react to exposure to fire and other elements.


In a higher interest rate environment and with permit delays common, quotes may be extended for a few months on projects that cannot start on time, but there is a hard limit on how long the quotes are valid. After the expiration date, projects may be re-underwritten subject to any changes in guidelines, new stricter standards, and with changes to rates, deductibles, and terms.

Each carrier has a process in place for extensions, and inflation plays a role, as carriers may want values updated to make sure they’re still sufficient as well as data on how much of the project has already been completed, which may increase the actual exposure for the insurer. Extensions may also require new capacity as some carrier appetites have changed over time and they may be unwilling to write all or part of an extension. Proposals for extensions should begin well ahead of time, with communication at least 60 days beforehand and detailed requests by 30 days to facilitate negotiations.


Underwriters are seeking more detailed information in submissions, such as itemized hard cost by trade and itemized soft costs, including expected rents, depending on the coverage sought. For general contractors, underwriters want the builder’s history with similar projects, loss experience with details about the specific losses, as well as information about loss prevention measures in place. Submissions should highlight risk management plans, including water damage mitigation, site cleanup, hot works guidelines, fire extinguishers and fire watch periods post-hot works. Structural renovations like adding floors or elevators are more challenging with limited markets available. When it comes to renovations, underwriters require structural engineering and construction data, including information about the foundation and updated valuation.


The turmoil in the property market and construction trends are having an impact on builder’s risk coverage. While capacity is generally available for builder’s risk coverage, placements have become more complex with more markets needed on larger projects. Brokers with deep experience in quota-shared-placements for multifamily frame and podium projects can provide valuable guidance on structuring such placements, including which markets are best in the lead position and how to obtain concurrency on terms and conditions. Knowledgeable brokers with strong market relationships can provide detailed guidance on building successful submissions and in obtaining the most cost-effective program for the project. Reach out to your local CRC Group producer today.


  • Property Brokers Adam DePietro and Joe Donlan are part of CRC Group’s Chicago office.
  • Jonathan White is a Property Broker and Rachel Jennings is a Senior Associate Broker with CRC Group's Bothell, WA office.
  • Property Broker, Ian Kampfer, is part of CRC Group’s Team Stratis in New York.
  • Mark Sangenito is a Property Broker with CRC Group’s Dallas office.
  • Randy VanHorn is a Property Broker with CRC Group’s Jenkintown, PA office.


  1. Climate change and La Niña driving losses, Munich Re, Jan. 10, 2023. See
  2. Federal funds rate history 1990-2023, Forbes, May 3, 2023. See:
  3. State Farm General Insurance Company: California new business update, May 26, 2023. See:
  4. Monthly Construction Spending, March 2023, U.S. Census Bureau. May 1, 2023. See
  5. Total construction starts slip in April due to sharp decline in manufacturing, Dodge Construction Network, May 18, 2023. See
  6. Golf, rent and commutes: 7 impacts of working from home, StanfordReport, May 25, 2023. See
  7. Fires in Structures Under Construction, National Fire Protection Association, October 2022. See