US construction spending eased in 2025 after peaking at a seasonally adjusted annual rate of $2.191 trillion in December 2024, falling to $2.149 trillion by May before rebounding later in the year, according to US Census Bureau data.
Through the first 10 months of 2025, the value of construction put in place totaled $1.825 trillion, down from $1.851 trillion in the same period of 2024. Residential construction accounted for $779 billion, compared with $798 billion a year earlier, while nonresidential spending was $1.046 trillion, down from $1.054 trillion. Dodge Construction Network is forecasting total construction starts to decline by about 0.4% in 2026.
Against that backdrop, insurance conditions for construction and design firms are broadly favorable, but vary by line and geography. According to Lockton's latest Construction & Design Market Update, new capacity and broadened appetites are fueling competition in some areas, while auto, excess casualty and residential liability remain more challenging.
The report said that results from the Jan. 1, 2026, treaty renewals suggest the casualty market for contractors is starting to soften, with more insurers competing for general casualty business. Commercial auto and excess casualty, particularly in tougher jurisdictions, continue to draw close scrutiny.
Capacity management remains a focus on excess towers. Insurers are sensitive to aggregate exposures and are reviewing programs more closely before committing limits, especially where operations present wildfire exposure, large fleets or activity in litigious venues. Structure, attachment points and pricing for upper layers are still shaped by these aggregate concerns, the report said.
Underwriters are also pushing to “de‑risk” casualty programs, putting additional emphasis on the quality of information at renewal. Detailed loss data, explanations around large claims, loss trends and operational changes can influence final terms.
Meanwhile, the builder’s risk market for residential construction is softening as more carriers enter the segment and widen appetites to include a range of projects, from single‑family homes to multifamily high‑rises, and both wood‑frame and noncombustible construction.
Conditions are particularly favorable for single‑family projects. In addition to renewing with lower rates, many buyers are securing reduced deductibles compared with recent years. London underwriters are said to view wood‑frame as a better‑managed class than five years ago, contributing to a notable increase in appetite.
Crime scores, wildfire exposure and severe convective storm (SCS) risk remain key underwriting considerations. While no new exclusions have been imposed on SCS, builder’s risk carriers are generally capping natural catastrophe coverage at around $25 million to $50 million on larger exposures.
The general liability market for residential “for‑sale” properties - including single‑family homes, tract developments and condominiums - remains restricted. Rates for these classes are typically two to five times higher than for comparable commercial risks, and most buyers are seeing modest year‑over‑year increases. Class‑action litigation, particularly around construction defect, remains a key concern for underwriters.
Excess liability over residential exposures is also becoming more difficult. Market sources reported increased use of quota shares on higher layers, with no meaningful influx of new capacity, limiting competition and keeping rates under upward pressure.
According to the report, many contractors and owners are channeling for‑sale residential work into controlled insurance programs (CIPs). General contractors and subcontractors often want this exposure insured under separate policies, but for‑sale properties are frequently excluded under their own general liability placements, pushing more risk into project‑specific structures.
An increasing number of liability markets now require third‑party quality assurance/quality control as a condition of underwriting.
Cyber insurance conditions for construction and design firms have been favorable since a correction between 2020 and 2022, with new capacity and more disciplined underwriting bringing stability. Since 2023, pricing has been competitive, but rising claim frequency and severity are beginning to put upward pressure on rates in 2026.
Threat actors continue to evolve tactics. Ransomware has become more sophisticated, with a shift toward data exfiltration and extortion over the threat of publication rather than purely encryption and decryption‑key payments. Artificial intelligence is being used on both sides: criminals are using AI to craft more convincing phishing and social engineering attacks, while construction and design firms are deploying AI tools to identify vulnerabilities and prioritize remediation.
Litigation following cyber incidents is becoming more common, the report said, driven by expanding state data privacy laws and class‑action activity. Although many construction and design businesses do not hold large volumes of consumer data, confidential project and client information remains an attractive target.
Despite a softer construction outlook and mixed signals across key lines, Lockton’s update indicates 2026 should be manageable for well-prepared construction and design firms.
Competitive conditions in general casualty and builder’s risk, particularly for single-family projects, create room to improve terms where data, loss history and controls are strong.
By contrast, constrained capacity for residential for-sale liability, tighter excess structures and a gradually firming cyber market point to closer scrutiny on higher-risk classes.
Early engagement, detailed information and clear evidence of risk management will be critical to securing the best available capacity and pricing.
