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Loss Trends and Emerging Risks: Construction/Builder’s Risk

Loss Trends and Emerging Risks: Construction/Builder’s Risk

By: Sovereign Insurance | Featuring Jeffrey Cunningham

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The growing need to build and rebuild is putting pressure on both the construction sector and the government. As part of our annual Q&A series, Jeffrey Cunningham, Commercial Lines Specialist at Sovereign Insurance, shares his thoughts on loss trends and emerging risks in the construction sector in 2023, and what organizations should watch out for in 2024.

What were the trends or key exposures you saw in 2023?

Climate change and extreme weather events continue to be top of mind for construction firms and contractors around the world. In fact, research shows that adverse weather delays 45% of construction projects globally, costing project owners and contractors billions of dollars in additional expenses and lost revenue each year.1 And that’s only expected to increase.

Closer to home, Canadian flooding and wildfires were very concerning for the insurance sector in 2023, especially in more urban areas like Halifax. But we also took note of several large fire incidents on housing construction projects in Ontario. This will likely put pressure on rating and capacity going into 2024.

Firms continue to struggle with labour shortages, both with their own staff and with sub-trades. The whole sector is having a difficult time attracting people, and those who are in it are overwhelmed with work. When you look at the building, rebuilding, and renovating that needs to be done, particularly in Nova Scotia and Ontario, there’s a real influx of work and just not enough contractors to do the work. 

What are some of the emerging risks to keep an eye out for in 2024?

As everyone has read about or knows firsthand, Canada has a housing shortage, and pressure is growing on the federal government to get new structures built. The Canada Mortgage and Housing Corporation (CMHC) says Canada will need 3.5 million more units built by the end of the decade, above what is currently planned.2

While housing activity is good news for the construction sector, contractors continue to face challenges such as the ongoing labour shortage, higher building costs, and higher interest rates. They should ensure they keep replacement values up to date and have enough skilled workers to complete the job, as labour shortages can affect timelines and budgets. From an insurance sector perspective, the increased activity in the building trades, on top of inflation on building materials, will likely impact rating and capacity.

For any project, it’s important for clients and brokers to review the insurance specifications and confirm their insurance program meets the requirements – a crucial step when bidding and/or securing tender projects.

We’ll continue to see increased use of new and emerging construction materials, for example, insulated metal panels and insulated concrete forms, which will require additional underwriting and an analysis of overall capacity for the project limits. With the demand for additional housing in a short 10-year time frame, we’re also likely to see more high-rise mass timber projects being proposed. These structures can be erected much quicker than typical poured concrete buildings and construction is now approved to up to 18 storeys.

Contactors, brokers, and insurance partners will continue to work to understand the risks associated with new construction materials and how they perform. Proper construction classifications will have to be allocated to these risks so that proper rate can be achieved.

How can organizations mitigate these risks?

The housing and labour shortage won’t be solved overnight. But I can talk about this from a builder’s risk perspective. For Sovereign, it’s important that the client, the broker, and the underwriter work together on construction projects. That means providing all the information that’s needed to underwrite the risk. Typically, that includes an application, as well as key documents such as blueprints, construction schedules, and geotechnical reports. It also means involving our Loss Control services team to visit the site, review technical information, and provide feedback. On larger projects, we typically involve our Loss Control team as well. It’s really about collaboration between the insured, the broker, and us to ensure the client has comprehensive protection and is following risk management best practices.



1 Air Force Institute of Technology, “Weather-related Construction Delays in a Changing Climate: A Systematic, State-of-the-art Review,” March 6, 2021

2 CMHC, “Estimating how much housing we’ll need by 2030,” Sept. 13, 2023


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