The construction industry has seen many ups and downs in the past few years, yet it has still managed to foster economic growth. Even so, certain risks remain that, left unmanaged, may affect the sector’s stability moving forward. As such, construction businesses should monitor some emerging developments that could impact the industry this year and adjust their risk management programs accordingly.

1. Economic headwinds

The inflation rate has cooled after reaching record highs in recent years, but it’s still influencing various expenses in the construction sector, thus driving up input costs. This has motivated some construction companies to increase the prices of their services to stabilize financial results. Supply chain struggles are also generating economic headwinds. The impacts of these struggles are twofold. First, the prices for building materials that have become hard to obtain are rising, making projects expensive to complete. Second, derailed material deliveries may extend project timelines and further elevate costs.

2. Building code changes

Over the past decade, multiple structural disasters have prompted changes to the legal framework for building safety. Although this legislation is evolving and varies between jurisdictions, key changes include mandatory reporting for safety incidents in high-risk buildings, routine updates to aging infrastructure, and the implementation of more resilient building materials that are better equipped to withstand disasters. Looking ahead, construction companies will need to adjust their operations and approaches to meet these new requirements.

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3. Insurance claim concerns

As social inflation increases the cost of insurance claims, nuclear verdicts—jury awards above $10 million—have surged. In the construction sector, these verdicts may arise from poor building practices, auto accidents, and worksite safety concerns. Nuclear verdicts can pose serious underinsurance concerns and financial fallout. Additionally, a rise in project disputes has exacerbated insurance claim costs in the construction industry. These disputes may stem from the remediation of faulty work, building safety issues, and insolvency-related failures. With many of these issues persisting, project disputes will likely impact insurance claim expenses for the foreseeable future.

4. Environmental exposures

Natural disasters have increased in recent decades, causing widespread damage. In more disaster-prone areas, such events can destroy construction materials, equipment, and structures in the process of being built, making projects all the more costly and extending completion dates. What’s worse, the increasing prevalence of these events has motivated many insurers to restrict coverage for businesses located in disaster-prone areas or, in certain locations, exit the market altogether. This has left some construction companies with greater exposure and minimal protection.

Going forward

Various trends are impacting the construction sector in 2025, emphasizing the importance of staying adaptive. By tracking these developments and mitigating their exposures, construction businesses can maintain operational success. Contact us for more industry updates and risk management guidance.

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This document is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. ©2025 Zywave, Inc. All rights reserved.