The U.S. construction market in 2025 is fast-moving. There’s been a surge in demand due to federal funding that pushed billions into infrastructure projects, from transportation and other critical infrastructure. In the private construction sector, data centers, warehouses, and clean-energy facilities are driving a more measured growth.
It's not all smooth sailing, however. The construction industry continues to be impacted by inflation, rising supply chain costs, and a serious labor shortage. The labor shortage remains one of its biggest obstacles. The Associated Builders and Contractors estimates roughly 439,000 net new hires in 2025 and about 499,000 in 2026 if spending accelerates and interest rates decline as expected. In a nutshell, the industry needs a substantially larger workforce to get done what it needs to get done. While material costs have stabilized somewhat, supply-chain risk and inflation continue to tighten profit margins.
Even with these hurdles, the construction market is expected to keep growing, perhaps more selectively. Looking to 2026, public infrastructure and industrial megaprojects are expected to remain robust, while other commercial sectors may face more headwinds.
In today’s operating environment, strong insurance isn’t just a financial safety net. It’s a strategic asset. Bigger projects, tighter margins, and a strained workforce bring more risk. Subcontractor defaults, jobsite mishaps, environmental incidents, Nat Cat events – all pose risk that can disrupt schedules and budgets. When adequately protected, contractors can confront risks head on and insurance becomes more than an operational expense but a driver of growth.
Having the right coverage can mean the difference between weathering a claim and failing under it. With underwriting tightening and rates rising in higher-risk areas, it’s more important than ever for contractors to be prepared and strategic with their insurance coverage. Contractors investing in safety, transparency, and risk management will find it easier to secure better coverage and terms. Those who don’t may face higher premiums, limited capacity, or exclusions.
To understand more about how the construction insurance market is supporting contractors and their continued challenges, there’s no better team to speak with than AXA XL’s Americas Construction leaders. Here my team’s product line leaders share their insights across multiple lines of construction insurance coverage.
Subcontractor Default Insurance (SDI)
Jim Richert, Profit Center Head, SDI
As the construction industry continues to see growth in project sizes and complexity, SDI remains a primary tool for contractors to ensure performance protection, particularly on private construction projects. In 2025, while it appears frequency of defaults is down versus prior years, severity is on the rise. The primary causes of defaults remain evenly split between financial and operational challenges. In certain construction markets, a single subcontractor default has significantly impacted multiple contractors, highlighting the need for contractors to carefully manage their own portfolios and thoroughly analyze subcontractors' overall work programs when making award decisions. While defaults continue across all trades, Mechanical, Electrical, and Plumbing (MEP) and envelope (those responsible for a building’s shell) subcontractors remain the most frequent and highest-loss contributors. To mitigate these risks, leading contractors are dedicating resources to manage these scopes from the design phase through procurement, supply chain oversight, and field installation.
Carriers should maintain a focus on underwriting discipline and ensure contractors effectively implement their risk management controls. We expect SDI program underwriting, pricing, and terms to continue tightening. Contractors play a critical role in mitigating default risk and must follow strong practices: acquiring contracts aligned with their expertise, thoroughly evaluating the financial stability and track record of subcontractors and managing projects diligently. Those investing in data, experienced personnel, and standardized procedures will be best positioned to secure consistent terms.
We proactively provide tools and resources to help SDI clients effectively manage subcontractor default risk. Our team offers continuous learning, risk insights, real-time feedback, and industry intelligence through a comprehensive suite of services, including detailed Claims Trends, Lessons Learned, and benchmark deep-dives (e.g., Subcontractor Prequalification, Quality Management, Project Go/No-Go, Contract Review, Risk Management). We also deliver direct training on construction and SDI management practices.
Additionally, we share industry insights via webinars, podcasts, white papers, the Sub Alert Network, Risk Insights, Peer Knowledge Networks, and Ecosystem Tech Partnerships, reaching a broad network of clients and brokers. Since subcontractor financial prequalification is a key control for our insureds, AXA XL provides access to platforms that support and enhance their prequalification processes.
Looking ahead to 2026, SDI growth is expected to align with the overall construction market.
When adequately protected, contractors can confront risks head on and insurance becomes more than an operational expense but a driver of growth.
Construction Casualty
Ed Totten, Head of Construction Casualty
The U.S. construction casualty market, like the broader casualty space, remains challenging. Claims inflation driven by higher litigation and medical costs, along with more complex indemnity demands are shaping terms and pricing. Capacity is tighter at lower attachment points, pushing many programs to higher retentions or multilayered placements.
For Construction, auto liability is uniquely volatile. Large contractors have large mixed fleets (owned, leased, rented, and subcontractor vehicles) and content, with the close interaction between vehicles and active work sites. Given these market pressures, insurers are looking carefully at safety programs, loss-history disclosures, and looking for stronger risk controls. For instance, standardized driver qualifications across all fleets and data-driven safety programs, like telematics, dash-cams, driver coaching, and rapid incident reporting, are highly recommended to control the exposure and support more favorable terms.
By 2026, social inflation and a volatile legal climate will remain headwinds, potentially lifting rates in aggressive markets. Capacity at the lower layers will likely stay tight, pushing contractors toward higher deductibles, retentions, or captive programs. In favorable sectors or geographies, competition could temper rate hikes and broaden negotiation on terms, exclusions, and risk-transfer language. To help contractors navigate construction casualty market in 2026, we’re committed to work with our construction clients with flexible capacity options, including higher retentions and wrap up programs, to help control costs, while strengthening risk controls, including help implementing data-driven safety programs that can help support more favorable terms and counter social inflation.
Builder’s Risk
Joe Vierling, Profit Center Head, Construction Property
In 2025, the U.S. builder’s risk market is at a softer turning point after a period of hardening. Insurers are cautious but more flexible. Terms are relaxing a bit, they’re more open to larger or more complex projects, and more capacity has entered the market. Cost inflation in labor, materials, and supply chain disruptions is pushing property values higher, so accurate project valuations and regular policy adjustments are more critical than ever.
We’re seeing a lot of construction activity involving data centers, manufacturing facilities, and healthcare facilities. Given the size and scope of these projects, AXA XL's Builder's Risk team is well equipped to address these projects’ insurance requirements with ample capacity, tailored coverage and the accompanying loss prevention that our risk engineers provide.
Looking ahead to 2026, we expect to see continued demand for capacity to build this in-demand infrastructure. Expect stricter underwriting in regions with higher exposure to natural catastrophes or rapid climate-change impacts. Overall, we expect to see steadier pricing and proactive risk mitigation.
Energy
Katherine Gerber, Head of Energy and Energy Transition
Businesses seeking reliable, affordable, and sustainable energy solutions are a big driver of the energy insurance market today.
The appetite for alternative energy projects remains strong. In the renewable arena, more insurers and syndicates are entering the market, adding capacity and generally delivering more favorable terms for policyholders. Even so, well-managed insurers are staying vigilant about emerging risks—especially technological risks, weather-driven exposures, and the long-tail liability claims that can come with newer, innovative energy systems.
Looking ahead to 2026, the energy insurance market is expected to pick up growth. Solar farms and onshore wind projects will continue to dominate insured volumes because they’re the backbone of the renewables market. There’s growing interest in offshore wind (despite the government blocking some projects of European manufacturers), battery storage (standalone or paired with solar or wind), hydrogen production and transport, and clean-tech infrastructure such as transmission, microgrids, and carbon capture. In the legacy energy space, insurers will keep covering oil & gas platforms, Petrochem, pipelines, LNG terminals, and decommissioning work, but those lines may see tighter underwriting and higher retentions.
At AXA XL, we’re helping clients face into risk by pairing integrated risk assessment and data-driven underwriting with flexible, end-to-end coverage across renewables and legacy energy assets.
Professional/Environmental Liability
By Ray Allen, Head of Construction Professional
As we move into 2025, contractors remain bullish. Our key partner’s backlogs are strong through 2025 and 2026, with some extending into early 2027. Growth is evident across infrastructure, manufacturing, and particularly in the technology sector. Recently data centers have become the fastest-growing construction market, with some projects reaching giga-project scale exceeding $10 billion in contract value. These projects are driving a surge in energy and infrastructure spending, as they often function like mini-cities requiring their own roads, power, and water sources.
Project sizes continue to increase, with multi-billion-dollar projects remaining prevalent. This growth is also impacting project durations, which are steadily lengthening as they push the limits of carrier terms and ERP capabilities.
However, industry headwinds persist in 2025. Recent policies are creating economic and labor market uncertainties, negatively impacting the construction workforce and cost of materials. Despite these challenges, our partners have demonstrated resilience by implementing controls to manage fluctuations in labor and material costs, helping to stabilize project timelines and budgets.
As we transition from 2025 into 2026, the contractors’ professional and pollution market remains relatively stable with no new entrants or exits. There is an increased demand for capacity, and the markets are responding, however some of the extreme mega projects are raising carrier’s aggregation awareness. In general, we hear claim frequency and severity are increasing across the space adding additional pressures on carriers. On the annual program side, we expect rates will remain flat to positive in the large contractor segment heavily dependent on loss performance. Increased competition in the middle market segment has pushed rates flat to negative, again dependent upon loss activity. PSPL rates remain high with carriers ever vigilant regarding capacity deployment predominantly in the $5M to $10M tranche size.
