How Economic and Climate Uncertainty Impacts the Builders Risk Market

• By: Olivia Overman
• November 3, 2025

In 2024, the U.S. builders risks insurance market was valued at $5.36 billion with a projected growth to $8.75 billion by 2033, according to Munich Re. A profitable line of business for most carriers, the market has transitioned from a hard market in the post-COVID-19 era to a much softer market.

Before 2023, the market witnessed a significant increase in capacity availability primarily “because a lot of carriers and managing general agents jumped into the market when rates were 30%-40% higher than they are today,” says Grant Chiles, executive vice president and national builders risks practice leader, Amwins.

However, looking ahead, there are a few unknowns that leave carriers with some decisions to make. “What we don’t know now is whether the capacity or the capital that came into the market is going to want to stay in the business when the rate of return is less than what their original business plan was three to five years ago,” Chiles says.

“In my opinion, the major concern of any carrier right now is competition. There’s just so much abundance of capacity out there,” Chiles continues. “They have to be very aggressive, if not more aggressive than what they would traditionally be comfortable with, just to stay relevant in the marketplace and continue writing projects.”

Over the past two years, a shift in market dynamics has occurred as the pressures currently facing the market have come to fruition, with financing capital becoming more restrictive and the number of construction projects diminishing.

In particular, macroeconomic pressures are playing a significant role in determining the market’s direction. “Over the last few years, the builders risk market has undergone notable shifts driven by macroeconomic factors, evolving construction practices and even climate-related risks,” says Scott Chamoff, senior director, inland marine middle market, Nationwide. “The most significant change was caused by rising construction costs, supply-chain disruptions driving up material costs, and labor shortages that impacted the ability to get construction projects completed on time.”

In the face of evolving industry trends, while the builders risk insurance sector continues to remain profitable, uncertainty within the construction industry is forcing builders and insurers to rethink their strategies.

Economic uncertainty, as well as higher interest rates, have led to “fewer ‘speculative’ homes being started that require the homes to be marketed while under construction,” says Mark Gromek, chief marketing and underwriting officer, Builders. “Uncertainty is playing a real role in the drop in the number of individuals who are looking for their first home, causing our builders risk book to drop year over year.”

“On top of that, what we are hearing from our policyholders is that many people who are on lower interest rates on their current home are opting to keep that interest rate over building their dream home or just buying a larger home—this causes less demand for new homes,” Gromek says.

Additionally, “one of the strangest, but most unique pressures that’s happening right now is to do with regulatory permitting and inspections,” Chamoff says. “We are seeing projects delayed from starting due to the inability to get their permits in place by their local jurisdiction.”

“That’s definitely creating a pressure point for our agents’ insureds as they’re trying to get their projects going,” he explains. “It seems to be a phenomenon that’s occurred probably within the last 12 to 18 months.”

Further, “there has been an increased focus on catastrophe risk in addition to the big three—flood, earthquake and hurricane,” Chamoff says. “The rising incidents of severe convective storms and hail in the Midwest have definitely contributed to some of the challenges and changes that we’ve seen in the market.”

Agents can ensure they are adding the most value for their builders risks clients by monitoring a market that is in a period of transition. One of the big headwinds is uncertainty, but “I think the market will ultimately plateau,” Chiles says.

Olivia Overman is IA content editor.