Builder’s Risk Market Challenges

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The builder’s risk market remains challenging in 2023, particularly for wood frame projects. Securing reasonable pricing terms and proper coverages to adequately insure the risk has become difficult. While carriers are aware of the challenges posed by increasing premiums and reductions in limits and coverages, the market remains constrained by rising project costs and a capacity and reinsurance issue for large wood frame projects. 

One major challenge is the stringent security requirements, including the use of certain approved vendors that are unfairly priced compared to competitors. Carriers are working to address these issues, but it takes time to move the needle. Tightening reinsurance regulations are exacerbating the challenges of securing large wood framed projects. 

The solution is to approach the process as a partnership between the broker and carrier, allowing sufficient time for underwriting. There are other options available, such as a tower approach or pro rata approach, where multiple carriers join in reaching the necessary limits. Clear and accurate communication, along with a thorough submission to carriers, is critical to navigating these challenges. A comprehensive submission helps carriers feel more comfortable with the risk and enables them to offer the necessary coverages at a competitive price. 

Several articles shed light on the current market conditions for the builder’s risk market. AMWINS, one of the world’s largest wholesale brokerages for 2022, notes on page 10 under “Construction” that the market is challenging but shows optimism for the future. CRC, a large wholesale company working closely in the builder’s risk segment, provides an informative article on the current conditions. 

One additional key factor driving costs is weather and climate disasters. According to NOAA, in 2022, there were over $18 billion in weather and climate disasters in the United States alone, resulting in 474 deaths and significant economic effects on the affected areas. This hard property market then affects all lines, including casualty and construction, leading to increased rates across the board. 

Overall, the builder’s risk market continues to be difficult in 2023, particularly for wood frame projects. However, by taking a partnership approach between brokers and carriers, allowing sufficient time for underwriting, and submitting comprehensive proposals, it is possible to navigate the challenges of the market. While weather and climate disasters are a significant driver of costs, optimism for the future of the market remains. Despite the challenges, there are opportunities for builders and contractors to secure the coverages they need at competitive prices with the right approach and collaboration with brokers and carriers.

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