Construction insurance markets across the western United States are under mounting pressure as inflation, climate-driven losses, and escalating litigation reshape how projects are insured, structured, and delivered, according to industry leaders.
Matt Honea, construction director for the West at Acrisure, said the traditional rules of engagement are rapidly changing in states such as California, Arizona, and Washington. Overseeing construction advisory teams across 14 states, Honea said insurers are contending with a convergence of social inflation, wildfire risk, and higher-severity claims that is pushing coverage terms tighter and costs higher.
“Auto insurance rates are experiencing upward pressure in many states, driven in part by the increasing size of liability verdicts,” he said. “In the multifamily development sector, market volatility continues on project specific liability programs, largely due to the increasingly challenging landscape of construction defect litigation.” From a property insurance perspective, “wildfire losses in the West have adversely impacted market conditions for builders risk placements, with high value frame projects and sites with wildfire exposure being most impacted.”
Even before inflation and climate volatility intensified, construction insurance in the western U.S. was already difficult to place. Capacity was limited, underwriting scrutiny was high, and large-frame and multifamily projects faced increasingly selective terms.
Those pressures have now intensified, Honea said, making specialized advisory support more critical than ever.
“it’s becoming more important than ever to partner with insurance advisors who understand evolving construction risks and are capable of providing the latest technology solutions, in addition to traditional insurance underwriting.”
For larger projects, particularly those exceeding $10 million, insurance structures are becoming more complex as carriers pull back.
“For projects over $10 million, we’re often using layered programs with excess and surplus (E&S) carriers, and we’re seeing fewer players willing to write that risk.”
While admitted markets can still support smaller projects, higher-value developments increasingly require alternative program structures and enhanced risk mitigation to secure viable coverage.
On-site technology has emerged as one of the most effective tools for developers and contractors seeking to improve insurability in a constrained market.
“The tech piece has been key,” Honea noted. “We’ve partnered with providers that install sensors for fire, water, or theft which are implemented in-tandem with insurance policies. That’s enabled us to negotiate higher limits and lower deductibles.”
Such systems provide insurers with real-time visibility into risk conditions, helping offset concerns related to wildfire exposure, theft, and water damage—particularly on high-value frame projects.
On the liability side, construction defect claims continue to weigh heavily on western markets, with legal environments varying significantly by state.
“The CD litigation environment varies between western states and working with a team who understands the factors applicable to a specific area has been an integral component of successful project delivery models.”
Extended statutes of limitation and evolving court interpretations have reduced insurer appetite in some jurisdictions, resulting in tighter terms and higher retentions.
“There are fewer carriers, and less competition which means they can dictate terms,” he said. “We’re seeing more non-renewals, higher retentions, and narrower liability forms.”
The impact is especially pronounced in for-sale residential construction, where litigation activity is driving some developers away from condominiums and tract housing.
“In addressing these suites, increased insurance costs have caused developers in some western states to steer clear of new condo or tract projects and shift their focus to apartments.”
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Beyond insurance pricing, Honea said economic pressures are increasingly surfacing in subcontractor performance and surety claims, particularly among second-tier trades.
“We’re seeing more defaults among second-tier trades, those not directly contracted with the general contractor but still tied into the payment bond,” he said.
Because general contractors remain responsible for bond claims, failures at lower tiers can quickly escalate into major liabilities.
“That second-tier electrician goes under, and suddenly the GC’s bond is on the hook,” Honea added. “It’s a cascading effect from broader economic stressors.”
Artificial intelligence is beginning to play a larger role in construction risk management, particularly in areas such as policy compliance and subcontractor insurance verification.
“The reality is, many risk managers aren’t trained to interpret complex E&S policy language,” he said. “AI tools can now flag whether an endorsement meets the contract requirements, and frankly, they’re getting better results than people.”
While adoption remains largely behind the scenes, Honea expects AI-powered compliance tools to become more visible as brokerages package them as client-facing services.
Looking ahead, Honea said insurance conditions are unlikely to ease—especially for for-sale residential projects—without broader regulatory and legal changes.
“Litigation is one of the biggest blockers to solving the housing crisis,” he said. “Insurance is getting more expensive and less available. At some point, all the stakeholders, trial lawyers, insurers and developers will need to find common ground.”
In response, Acrisure’s construction strategy is increasingly centered on value-added services beyond insurance placement, including claims advocacy, safety programs, legal education, and technology integration.
“Our construction clients shouldn’t see us as just brokers,” he said. “Oftentimes, the solutions we bring to the table are broader than traditional insurance offerings and we frequently support our clients’ payroll, 401K, and financial needs. Ultimately, we want our construction advisors to become as essential to a client as their CPA or legal counsel. That’s how we grow, by helping them succeed beyond insurance.”
Originally reported by Susan Essex in Insurance Business Mag.
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