3 Economic Forces Putting Strain on Construction, and How Insurers and Insureds Are Responding
It’s been a tough three years for the construction industry.
Lingering labor shortages and supply chain issues brought on by the pandemic have caused project costs to shoot up. In an effort to govern inflation, the Federal Reserve has raised interest rates, resulting in higher borrowing costs.
Noticing a pattern? Today’s economic conditions are increasing the cost of construction projects, which in turn multiplies the cost of an insurance loss should a claim occur. Beyond increased materials and labor costs, the industry is contending with a spate of nuclear verdicts — those over $10 million — making litigation more perilous than ever.
Still, contractors and their insurers have remained resilient. They’re taking advantage of federal funding opportunities, strengthening rates and introducing innovative risk management strategies so that they can continue building. Carriers who have been in the business for decades are equipped to help construction insureds navigate today’s market.
“The market is in a really interesting juxtaposition right now,” said Helen Fry, vice president of E&S Brokerage Construction at Nationwide. “There’s an advantage to being with more stable carriers that have been around a long time.”
Here’s a look at three key economic pressures — and how contractors and their insurers are responding to today’s market conditions.
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