Commercial properties across the UK are facing a growing risk of being underinsured in 2026, according to RebuildCostASSESSMENT.com.
Rising rebuild costs, regulatory changes and more complex reinstatement requirements are combining to leave even well-managed portfolios exposed if sums insured are not kept up to date.
"Commercial reinstatement is inherently more complicated than domestic rebuilding," said Gautham Rajendar, technical lead for commercial properties at RebuildCostASSESSMENT.com. "Multiple occupancies, bespoke fit-outs and compliance standards all add to the rebuild cost, and those factors are often underestimated."
Recent government data showed that construction material prices remain higher than a year ago, adding further pressure on declared values. Department for Business & Trade figures indicated that prices were around 2% higher in January 2026 than the year ago period, with larger increases reported in areas such as new housing materials and repair and maintenance.
The broader property market backdrop is also challenging. UK property insurance claims are expected to reach £6.1 billion in 2025 – the highest annual payout on record – with weather‑related claims alone estimated at £1.6 billion, more than double the annual levels seen between 2017 and 2021. At the same time, premiums are forecast to ease in 2026, creating a familiar squeeze between rising loss costs and softening rates.
Against that backdrop, underinsurance has become a systemic concern. One recent report found that a majority of UK properties were underinsured in 2025, reinforcing the risk that current sums insured will not cover full reinstatement costs after a loss.
In a global broker survey by FM Affiliated, 61% of respondents said regular property valuation updates are among the pieces of advice most often overlooked by mid‑market clients, potentially exposing them to future losses.
Larger and more complex sites are particularly exposed. Warehouses, manufacturing facilities and retail premises often require reinstatement of intricate electrical, safety and mechanical systems, as well as specialist fixtures and fittings that are easily overlooked when setting sums insured.
Regulatory change is adding a further layer of uncertainty for owners and insurers.
The Building Safety Act, together with evolving fire safety and energy efficiency standards, can materially increase the cost of rebuilding after a major loss. Where insured values are still based on outdated or simplified figures, policyholders risk discovering a shortfall when they come to claim.
Outdated or unsupported sums insured can also create financial and compliance challenges. Under the FCA’s Consumer Duty regime, insurers and intermediaries are expected to deliver fair outcomes for customers, which includes ensuring that cover limits are fit for purpose. That expectation sits alongside a softer but growing regulatory focus on small business outcomes and the evidential basis for recommendations.
“Some insurers are placing greater emphasis on the evidence behind declared sums insured,” Rajendar added. “They want to see that the figure has a clear factual foundation, rather than being based on a round number or a simple indexation uplift.”
With construction costs, climate‑driven losses and building standards all in flux, accurate and regularly refreshed rebuild data is becoming a central part of commercial property risk management. That discipline is likely to be critical in avoiding gaps between policy limits and the real cost of putting commercial buildings back on their feet after a loss.
