Top 3 Challenges Impacting Builders Risk Market – IA Magazine

Builders risk insurance is supposed to be the calm, sensible adult in the room: protect a project while it’s being built,
pay for covered damage, and let everyone get back to arguing about paint colors. But lately, the builders risk market has been
dealing with three problems that don’t just nudge projects off-trackthey body-check them into the drywall stack.

IA Magazine summed it up well: supply chain disruption, inflation, and an increase in extreme weather are reshaping
builders risk exposures. The tricky part is these challenges aren’t separate lanes on a highwaythey’re three cars merging at once
with no turn signals. And the “horn” is your premium.

Quick refresher: What builders risk insurance actually covers

Builders risk (often called “course of construction”) is a property policy designed for buildings and structures while they’re under
construction or renovation. Coverage details vary by insurer and project, but the goal is consistent: protect the work in progress.

What’s typically at stake

• The structure under construction (including materials that become part of it).
• On-site materials (and sometimes off-site storage or in-transit, if endorsed).
• Temporary structures (job trailers, scaffoldingsometimes included, often by endorsement).
• Soft costs like interest, taxes, architect fees, and certain additional expenses (if you buy the coverage).
• Delay in completion / DSU (Delay in Start-Up) for certain projectsespecially larger commercial work (if added).

Builders risk is also famously picky: it may exclude or limit flood, earthquake, wind/hail in certain areas, workmanship issues,
and certain “wear-and-tear” style losses. That pickiness matters more than ever when today’s top challenges amplify time-on-risk,
replacement costs, and catastrophe frequency.

Challenge #1: Supply chain issues and schedule whiplash

Supply chain pain isn’t just “my tile is delayed.” In builders risk, delays can change the entire risk profile of a project.
IA Magazine highlighted a real-world dynamic: a single delayed component (like roofing materials) can cascade into re-sequencing
subcontractors, stretching timelines, and forcing temporary or substitute materials that weren’t pricedor underwrittenat the start.

Why underwriters care (and why you should, too)

• Longer duration = longer exposure. The longer a project sits “open,” the more time it has to meet a windstorm,
  a theft incident, a water loss, or a fire.
• Re-sequencing can create new vulnerabilities. Workarounds may mean partially installed systems or temporary protection
  that behaves badly in weather events.
• Substitutions can change hazard characteristics. Alternative materials might have different fire ratings, theft desirability,
  or susceptibility to water damage.
• Delays can trigger coverage friction. Many builders risk policies have completion deadlines or reporting requirements.
  If the project timeline drifts, endorsements or extensions may be needed.

Even as some supply chain pressure has eased compared with the peak disruption era, contractors still report ongoing concern
about materials pricing and availabilityand scheduling remains sensitive to labor constraints and procurement timing.
In other words: it’s calmer, but it’s not calm.

What this looks like on an actual job

Imagine a mid-size office build where interior framing and MEP work depend on the building being dried-in. If the roofing system
is delayed, interior trades get pushed. Then the schedule dominoes fall: subcontractors may not be available when you need them,
and your finish date slips. That slip doesn’t just annoy the ownerit can change the builders risk exposure, the insured values
over time, and the probability of loss during a longer build.

How to reduce supply-chain-driven builders risk pain

• Track long-lead items like an underwriter would. Identify the top 10 schedule-critical materials and update delivery timing regularly.
• Revisit policy term and completion dates early. If you know you’re slipping, address extensions before the deadline becomes a claims argument.
• Use endorsements strategically. Off-site storage, transit, and soft costs can be the difference between “annoying” and “financially disastrous.”
• Document substitutions. If the project uses alternates, make sure the risk narrative stays aligned with what’s actually being built.

Challenge #2: Inflation and the “it costs more than the policy says” problem

Inflation is the challenge that turns a well-planned builders risk limit into a polite suggestion. IA Magazine pointed to the
construction cost reality: building and material cost indices jumped sharply during recent years, and insurers have been paying
more than originally anticipated to restore properties after a covered loss.

Here’s the builders risk-specific twist: builders risk premiums are typically tied to the total completed value of the project.
If that value climbs significantly midstreambecause materials, labor, fuel, disposal fees, and equipment costs risethe policy can drift
toward underinsurance unless it’s adjusted.

Why escalation clauses help… but won’t save everything

Many builders risk forms include an escalation clause (sometimes called increased limits or value reporting provisions).
Historically, it was meant to cushion ordinary change orders. But in an inflation-heavy market, insureds may lean on it to close a larger gap.
Carriers may resist using escalation as a substitute for properly updated values because the premium is priced on the completed project value.

Where inflation shows up in claims (even when the cause of loss is boring)

• Replacement materials cost more than the original budget assumed.
• Labor is tighter and pricierespecially for specialized trades.
• Debris removal and fuel-related costs inflate the total loss settlement.
• Longer lead times can drive additional expenses (and increase the chance of secondary damage).

Industry groups tracking construction economics continue to show how much cost pressure sits inside the price of a new build.
For example, NAHB reported that construction costs made up 64.4% of the average price of a new home in 2024 (up from 60.8% in 2022),
a reminder that replacement and build costs can move fasteven when your project scope doesn’t.

How to keep inflation from turning into a coverage shortfall

• Set a valuation cadence. Don’t treat total insurable value like a “set it and forget it” crockpot. Revisit values at least quarterly
  (monthly for large projects or volatile material mixes).
• Align escalation with reality. Use escalation as a buffer, not a fantasy. If the whole project is now 12–18% higher, talk to your broker
  about updating the reported value (and premium) rather than hoping an endorsement covers it.
• Understand coinsurance or valuation conditions. Some builders risk placements can penalize underreported values. Know the math before a loss teaches it to you.
• Budget for “invisible” inflation. Things like debris removal, expediting, and equipment rental often surge when supply is constrained after disasters.

Challenge #3: Extreme weather and catastrophe volatility

If supply chain disrupts time and inflation disrupts money, extreme weather disrupts bothwhile also disrupting everyone’s mood.
IA Magazine emphasized that natural catastrophes are occurring more frequently and intensely, across more locations and perils, pushing
insurers toward more detailed weather analysis in underwriting.

And this isn’t abstract. NOAA’s disaster tracking shows the U.S. has experienced hundreds of weather and climate disasters since 1980
with costs reaching at least $1 billion each (inflation-adjusted). That type of loss environment shapes how property insurers and reinsurers price risk.

Why builders risk gets hit harder than “regular property” in some weather scenarios

• Partially completed structures are more fragile. Open walls, incomplete roofs, and temporary protection are vulnerable to wind and water intrusion.
• Sites are often exposed and unsecured. Materials can become windborne debris, and theft risk rises after storms when security is disrupted.
• CAT events create post-loss inflation. After a major storm or wildfire, demand surges for labor and materials, pushing claim severity up.
• Projects concentrate value. A single large build can represent enormous total insured value, especially in today’s mega-project era.

Severe convective storms: the not-so-small “secondary peril”

Many people think “catastrophe” means hurricanes or wildfires. But severe convective stormshail, straight-line winds, tornadoeshave become
a growing insurance challenge. Aon has highlighted how insured losses from severe convective storms have risen over decades, driven in large part
by exposure growth and cost inflation. For builders risk, hail and wind can damage materials on-site, tear temporary coverings, and delay schedules
exactly when the calendar is already stressed.

Capacity strain: big projects, bigger limits, tougher placements

The builders risk market isn’t just handling “more weather.” It’s also handling bigger projects. Massive developmentslike major infrastructure work
and large-scale data center constructioncan push into multi-billion-dollar project values, which tests available construction insurance capacity and encourages
layered programs, higher deductibles, and stricter terms.

In catastrophe-prone regions (wildfire, convective storm, hurricane zones), market participants have noted builders risk placements can require elevated
deductibles and careful structuring. The outcome is often a program that still gets donebut with more negotiation, more data, and more “please send one more spreadsheet.”

How to keep weather risk from derailing a builders risk placement

• Start with location intelligence. Know your wind/hail/wildfire/flood exposures before you shop the market.
• Plan for deductible reality. CAT deductibles can be percentage-based and painful. Model the financial impact upfront.
• Use risk engineering as leverage. Stormwater management, temporary roof protocols, tie-down procedures, and jobsite housekeeping can meaningfully improve underwriting confidence.
• Protect materials intelligently. Secure storage, staging plans, and weather monitoring reduce loss frequency and claim severity.

What these three challenges have in common

Supply chain issues, inflation, and extreme weather all create the same ugly triangle:
longer projects, higher values, and more concentrated risk.
A delayed project stays exposed longer. Inflation pushes the replacement cost higher. Weather volatility increases the odds that something bad happens during that longer window.
They feed each other, too: storms disrupt manufacturing and logistics; delays amplify labor and material costs; rising costs can pressure builders into shortcuts that increase loss potential.

A practical playbook for owners, GCs, and agents

The builders risk market is still insurable. The “secret” is boring-but-effective: treat builders risk like a living program, not a one-time purchase.
Here’s what tends to move the needle.

1) Build a valuation routine (and put it on the calendar)

• Update total insurable value as change orders hit and costs move.
• Clarify whether equipment, owner-furnished items, and soft costs are included.
• Confirm how escalation applies and what documentation is needed.

2) Treat schedule as an underwriting factor, not a project-management footnote

• Identify long-lead materials and track delivery changes.
• Communicate expected completion shifts early to avoid coverage gaps.
• For large projects, consider whether delay/DSU coverage is appropriateand whether it’s realistic in a CAT-heavy region.

3) Control the everyday losses that get worse when everything else is chaotic

Weather and inflation get headlines, but many builders risk losses still come from extremely unglamorous eventswater damage, theft, and fire.
When supply chain and schedules are stressed, these “ordinary” losses can become unusually expensive.

• Water: implement leak detection where feasible, pressure-test lines, and enforce dry-in protocols.
• Theft: secure materials, improve lighting, limit site access, and track high-value equipment.
• Fire: control hot work, enforce housekeeping, and coordinate with local fire protection requirements.

4) Make contract language your friend (not your surprise enemy)

• Clarify who purchases builders risk (owner vs. GC) and who is insured.
• Align waiver of subrogation, deductible responsibility, and claim reporting duties.
• Confirm coverage for off-site storage, transit, and testing/commissioning if relevant.

Outlook: What to expect next in the builders risk market

The market’s direction is shaped by a simple truth: construction is booming in certain sectors, projects are larger, and catastrophe volatility
keeps underwriting cautious. Expect continued emphasis on data quality, risk engineering, and clearer project controlsespecially for high-value
builds in CAT-exposed zones. And for mega projects, don’t be surprised if placements require layered insurance towers and more capacity conversations
than anyone wants at 4:30 p.m. on a Friday.

The good news: insurers (and brokers) are getting sharper at matching terms to project realities, and sophisticated insureds are treating builders risk
like part of project governance rather than a box-check. That mindsetplus disciplined valuation and schedule managementis the most consistent “unlock”
for better outcomes.

Experiences related to “Top 3 Challenges Impacting Builders Risk Market – IA Magazine” (realistic field scenarios)

The builders risk market is full of lessons that only appear after you’ve stepped on the rake. Below are three realistic scenarios that mirror what
owners, contractors, and agents have been dealing with as supply chain disruption, inflation, and extreme weather collide. Think of these as
“experience-based reminders” you can use before the project teaches them the expensive way.

Experience #1: The delayed roof that turned one problem into five

A commercial project schedules interior work right after the building is dried in. Then a key roofing system is delayed. The GC re-sequences work and tries
to keep crews productive, but subcontractors are booked tight. Interior trades shift to other jobs, and when the roof finally arrives, the project can’t simply
“snap back” into the original timeline. The build extends by months.

The builders risk impact shows up fast: the policy term needs an extension, the project’s value creeps upward due to rework and schedule inefficiency, and the
longer open-site duration increases the chance of weather and theft losses. A storm event damages temporarily protected areas, and suddenly the claim isn’t just
about repairing damageit’s also about the cost of replacement materials and the knock-on schedule disruption. The lesson most teams take from this: treat schedule
extensions as a coverage management task, not a last-minute paperwork scramble. If the project is slipping, align insurance terms early and keep values current.

Experience #2: Inflation quietly ate the limit (and the escalation clause wasn’t enough)

A multi-family project is insured with a completed value that made perfect sense at the time of binding. Then materials pricing and labor costs rise steadily.
Change orders increase. The team assumes the escalation clause will handle ituntil a covered water loss damages installed materials and stored inventory.

When the adjuster starts pricing repairs, it becomes clear the replacement cost environment has moved beyond what the policy anticipated. The escalation clause
helps, but it was built for modest increases, not a prolonged inflation cycle. Now the project owner is negotiating a claim while also learning that underreported
values can create disputes about how much should have been insured in the first place. The “experience-based” fix is simple but disciplined: update values as costs
change and make sure the insurance record reflects reality. Builders risk works best when the insured value is a living number tied to project accountingnot a
historical snapshot.

Experience #3: A hailstorm, a CAT deductible, and a very unhappy spreadsheet

A project in a convective-storm-prone region gets hit with hail and high winds. Materials on-site are damaged, temporary coverings fail, and water intrusion creates
additional repair scope. Everyone expects the builders risk policy to respondand it doesbut the surprise is the deductible structure. Instead of a flat deductible,
the policy includes a catastrophe or wind/hail deductible that’s percentage-based. The out-of-pocket number is larger than the project team budgeted.

Meanwhile, local demand spikes because multiple sites were impacted. Contractors and material suppliers are slammed, pricing goes up, and repairs take longer than
planned. The claim becomes a schedule issue, a budget issue, and a relationship issue. The takeaway that teams remember: catastrophe terms are not “fine print.”
Model the deductible impact before binding, and invest in storm readinessmaterial staging, tie-down protocols, drainage planning, and rapid-response protection steps.
If a project is in a known hazard region, underwriters often respond favorably to a documented weather plan, and that can improve terms or at least reduce friction.

Conclusion

Builders risk is still doing its jobprotecting projects while they’re being builtbut the job has gotten tougher. Supply chain uncertainty stretches timelines,
inflation strains insured values, and extreme weather makes losses more frequent and more expensive. The best response isn’t panic (or pretending it’s 2018).
It’s practical discipline: keep values updated, treat schedule as a risk variable, and build a risk-control story that underwriters can trust.

If you do that, you’re not just buying coverageyou’re building a builders risk program that can survive the real world, where material deliveries are late,
costs are up, and storms don’t check your project schedule before showing up.