This article is sponsored by Munich Re.
The builders risk insurance market is in the midst of a major evolution. Valued at $5.36 billion in 2024, it's projected to reach $8.75 billion by 2033 according to the 2025 Verified Market Report. But even as the sector expands, the construction industry – the engine behind that growth – is confronting a level of unpredictability that’s forcing both builders and insurers to rethink how they do business.
Speaking to Insurance Business, Brady Thomas, Assistant Vice President and Inland Marine Regional Underwriting Manager at Munich Re Specialty, doesn’t mince words about what’s making this moment so challenging.
“One of the big headwinds here is uncertainty,” he says. “[Nothing is] very calm at the moment – it might seem static but it's not. It's unknown what's going to happen.”
The unpredictability stretches across critical components: workforce availability, material costs, jobsite logistics, and pricing models. And while many in the industry point to inflation or tariffs as key pressures, Thomas argues that these are symptoms – not root causes.
“We don't know what's happening,” he told IB. “You can't really price for things you can't expect - how you're going to man the job site, where you source your material. There’s just a lot of unknowns.”
Still, there are signals of stabilization on the horizon. As the second half of 2025 approaches, some economic fundamentals are improving. Inflation is cooling, down to around 2.3% from more than three percent the year prior - and there’s growing optimism that interest rates will follow.
“I think two percent is probably as low as it's been in the last four to five years,” Thomas added. “And while the Federal fund rate isn't coming down as quick as we would like it to, there’s the expectation that it will continue to come down eventually – and we get rid of some of the uncertainty.”
Government-backed infrastructure spending is also providing a major tailwind for the industry. Proposed projects such as the proposed California high-speed rail and the Las Vegas Convention Center Loop, massive undertakings worth $50 to $60 billion, have the promise to inject much-needed investments into the industry.
“These are going to take a lot of insurers, a lot of money, and a lot of investments,” Thomas added. “You also have big data centers being constructed to handle all the data mining and AI. These are massive projects that are still happening despite the uncertainty.”
And that activity matters. The construction industry currently represents approximately 14% of global GDP, and a McKinsey report estimates it could grow nearly 70% by 2040. These mega-projects, Thomas explained, are not only viable – they are shaping how the insurance industry collaborates around risk.
“Previously, people were taking on massive projects - around $400, $500, $600 million - all by themselves,” he told IB. “Now they are buying quota shares where the risk is getting spread out... making it easier to manage as an industry.”
But even collaboration has its limits without data, and that’s where technology is becoming a transformative force. Builders who’ve historically struggled to control loss exposures are now turning to AI and Internet of Things (IoT) tools to manage sites with real-time precision.
“They can control a lot more of their project just from their phone or their tablet,” Thomas explained. “They can see if there’s water flow happening that shouldn’t be happening, and they can shut off the water valves. They can monitor the heat, and they can see who’s on-premise – all can be done from their phone.”
That matters especially because water damage has become a dominant loss category in recent years, leading to crippling deductibles.
“We’ve seen $500,000 to $1 million water damage deductibles, which is really putting a lot on the contractor,” said Thomas. “Now that they can control the water flow from their phone and are alerted if there’s a leak, they can stop it before significant damage occurs. That results in them being able to say, ‘I have great control.’”
And insurers have taken notice. Risk models are beginning to reflect this added visibility – and so are pricing decisions.
“Now my maximum foreseeable loss isn’t $20 million, it might be a million,” Thomas said. “So now my pricing gets a lot smoother, and I can also distinguish between that contractor that has these devices in place and someone who doesn’t.”
And beyond risk mitigation, tech is also helping general contractors source projects more strategically. New platforms allow them to track public and private bids nationwide, something previously impossible for firms limited to local networks.
“They can see how many people are bidding on a project,” Thomas added. “Maybe they back away – maybe they see an opportunity. Now that they can see this nationwide picture.”
Efficiency gains also show up in scheduling. AI tools are streamlining material procurement and workforce management, enabling shorter project durations, even as labour and material costs rise.
“While the costs are going up, the project duration is going down,” Thomas added. “So there’s some cushion there for the overall cost of the project.”
Here, Insurtech’s and Managing General Agents (MGAs) are extending this tech advantage by delivering underwriting data that used to take weeks to collect. From real-time flood zones and wildfire maps to elevation data and storm histories, underwriters can now gain instant insight into granular site conditions.
“There are MGAs coming out and saying, ‘Here’s the flood zone, here’s the wildfire map, here’s the history of the storms that have come through, all in one place,’” Thomas added. “And now what we’re seeing from them matches with what people are pulling from independent resources.”
This validation is closing the gap between broad-stroke assumptions and site-specific assessments. It's also allowing carriers to rate jobs based on actual on-site controls, not just construction type or location. That shift from static to dynamic underwriting is what Thomas sees as the most promising evolution, with builder’s risk space no longer just about insuring the structure, it’s about understanding and enabling the ecosystem around it.
“There’s benefits to the insurance company, because the carriers get to see this information upfront,” he told IB. “And once we dig in further, that’s when we can start differentiating the pricing and the terms and conditions that go along with it.”
For contractors and brokers alike, the message is clear: uncertainty is here to stay - but so is innovation. And those who embrace technology, data, and collaboration will be best positioned to build through the storm.
To learn more about Munich Re Specialty’s Inland Marine builder’s risk coverage, visit:
https://www.munichre.com/specialty/north-america/en/solutions/inland-marine-coverage.html
