Much like the rest of the world, as we enter into 2025, driven by a global focus on efficiency, sustainability, resilience and the adoption of advanced technology, the construction and insurance industries continue to develop and evolve. These trends are reshaping the global landscape, with each region contributing unique insights and strategies that collectively advance the sector.
Within this edition of our Willis Construction Rate Tracker, the global construction insurance sector is facing a multitude of challenges, with labor shortages continuing to be a prominent issue. In North America, the shortage of skilled labor is intensifying, with some estimates suggesting they will need an additional 500,000 new workers to meet the pending construction demand [1]. Similarly, in Europe and LatAm labor shortages are a growing problem, while in Asia, the shortage of skilled labor is heightened. Labor shortages often require that contractors and project owners rely more heavily on less experienced or skilled labor which often results in poorer quality construction and reduced adherence to safety protocols. Thus, insurance markets are more closely scrutinizing schedules and estimated project costs as they evaluate and price each individual risk.
Economic factors such as the continued escalation of the pricing of building materials are also influencing the global construction insurance sector. As the price of materials are driving project costs higher, insurance premiums, often rated against these costs are in turn rising. It is also anticipated that the recent increase in the utilization of tariffs, especially as pertains to the importing/exporting of construction materials will exacerbate the increases in the overall costs of these items. Outside of the United States, other regions are also greatly influenced by their own respective economic conditions. In Asia, government stimulus and private investment are driving growth, particularly in the energy and infrastructure sectors. The Australian construction industry is expected to see modest growth, especially in the residential sector, driven by government policies focusing on affordable housing. In Europe, the market outlook is stable, with a focus on a sustainable energy transition, but once again, the skilled labor shortages remain a concern.
Despite these headwinds, the global construction insurance sector is experiencing some positive trends. Most notably, there is the consistent theme around a softening insurance market in many regions. A softening market in certain regions, and specific lines of coverage may result in lower premiums. Additionally, a softening marketplace may also provide an opportunity to negotiate better coverage terms and conditions for our clients.
There are some consistent and specific insights for all geographies that can be garnered by the commentary provided in this document.
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