Construction
Construct a resilient future using a strong risk management approach as a blueprint for success.
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What to Expect in 2025
Construction firms will face unpredictable conditions in 2025, including the environment, market disruptions, uncertain interest rates and the overall economy.
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1
Profitability
Despite optimism, systemic and economic headwinds could pressure profits.
2
Vitality
Address labor gap with benefits,
training and tech.
3
Resiliency
Preparedness and new solutions are essential
as resiliency is tested.
4
Technology
Turning to tech in search of solutions.
Despite optimism, systemic and economic headwinds could pressure profits.
1 | Profitability
16%
Percentage of construction firms that have sufficient insurance coverage to protect profits.1
Address labor gap with benefits, training and tech.
2 | Vitality
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Preparedness and new solutions are essential as resiliency is tested.
3 | Resiliency
The construction industry will continue to find work on large, multi-billion-dollar projects, largely in infrastructure. But inflation, climate change and interest rates — not to mention the expense of insuring the large risks that come with sizable construction projects — could dampen profits.
Total new construction spending is projected to reach $2.15 trillion in 2025, hitting $2.34 trillion by 2028.2 Non-residential construction spending is only expected to increase 2%, stalling after this year’s anticipated 7% gain.3
In 2025, cooling inflation and declining interest rates are likely to result in more construction projects, but also upward pressure on labor and supply costs. Materials costs will continue to have a major effect on profitability due to fluctuating prices.4
Forty-four percent of construction respondents of HUB International’s 2025 Outlook Executive Survey report they are “highly confident” about their companies’ performance in 2025, which bodes well for growth and the overall state of the industry. However, any new profits could be significantly impacted by the lack of insurance to protect against risk, with only 16% citing that the coverage they have is adequate.
Equally concerning is the systemic risk of $2 trillion in commercial real estate debt maturing over the next two years.5 Refinancing these loans with high vacancy rates6 is likely to result in more defaults, potentially causing a broader lending pullback, which would be a major blow to the construction industry’s bottom line.
As the business environment remains unstable — and unpredictable — tightly managed financial controls will help construction firms compete for a shrinking pool of capital.
To keep balance sheets strong as construction firms handle larger and more complex projects, companies will need to lean on an experienced insurance broker who can proactively identify alternative insurance options and risk transfer mechanisms, such as parametric insurance and retention strategies.
Companies partnering with other construction firms on large projects will need guidance from their broker and a holistic approach to insurance and risk management as the level of complexity and interconnectivity increases with each partner.
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The construction industry’s continuing labor shortage may alleviate a bit in 2025 — the projected shortage will drop by about 50,000 workers in 2025 — but there will remain a worker deficit of more than 450,000.7
Making matters worse: One in five construction workers is older than 558 and there’s a dearth of incoming Gen Zs and Millennials entering the profession.
Severe weather conditions are also a major problem — not only do they increase the danger to workers but they are likely to drive down the number of people interested in construction as a profession.
The industry has turned to apprenticeship programs for help. In fact, there’s been a 40% jump in registered apprenticeship programs in the previous decade, with construction firms and their trades accounting for more than a third of all apprentices, more than any other sector.9
Technology can also help. For example, drones and robots can help with the most dangerous construction tasks. There’s also wearable tech that detects body heat and fatigue and provides GPS tracking to detect falls or no movement for an extended period.
Personalized benefits can also help attract and retain workers. Respondents to the HUB survey cited challenges in providing adequate benefits to compete for top workers, and nearly half reported low employee participation and satisfaction with current programs, highlighting an opportunity to structure a benefits strategy that focuses on what employees value. By digging into the company’s population data through a Workforce Persona Analysis, a customized strategy can deliver benefits that workers truly want and need.
For instance, childcare benefits could help attract more women to the business, while mental health benefits are key to combat high rates of suicide within the industry.10
Other creative solutions could include access to personal insurance to take an additional layer of stress off employees’ plates.
This strategy can deliver quality employee experiences (QEX) that create an environment in which employees are more engaged and productive than those without personalized benefits.
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Challenges ranging from economic to atmospheric will continue to test construction firms’ resiliency in 2025.
Weather extremes will continue to disrupt project timelines and more seriously put workers at risk. Extreme heat is a top cause of death for workers laboring outside,11 and adjusting work schedules to protect against sweltering temperatures makes physical construction work take 36% longer.12 Compounding concerns are the continuing risks of unpredictable materials costs and the prospect of refinancing trillions of dollars in commercial real estate.
Modular construction can help construction firms stay resilient against climate-related and economic challenges, offering safer working conditions and an entrée into mega construction projects. These mega projects offer opportunities to improve efficiencies, capacity and share risk through strategic partnerships or mergers. Construction megadeals (valued over $1 billion) began surging globally early in 2024.13
As catastrophic events, inflation and supply chain constraints affect insurance costs and availability at required limits, rigorous risk management is critical for resiliency in 2025.
Parametric insurance, which pays policyholders when weather thresholds pass a prespecified mark, is an alternative to traditional insurance programs that don’t cover losses associated with heatwaves, for example.14 Another alternative, project-specific insurance, is customized for the job with coverage and costs shared among owners, general contractors and subcontractors. Project-specific insurance helps insulate and protect the rest of the business if there is an incident or claim on a large project.
Firms who work in lockstep with a best-in-class broker to develop a comprehensive claims management plan will be best positioned to weather the uncertainties of any type of business disruption. Additionally, having an effective loss mitigation strategy can help reduce the severity of the claim by leveraging coverages, such as Extra Expense, to reduce downtime and minimize loss of profits.
Construction firms readying themselves for the challenges of 2025 will get their houses in order to take advantage of the good and weather the bad. An experienced broker is key to help evaluate the adequacy of insurance programs and provide risk management resources that support business goals.
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Technology stands to transform nearly every facet of the construction business, potentially alleviating long-standing pressures like safety, productivity and labor shortage. But many firms are overwhelmed by it and have neither the skills nor the budget to invest — nor are they prepared for the accompanying risks like bad actors hacking equipment or shutting down sites entirely for ransom.
Still, investments are growing in data analytics, the internet of things (IoT) and telematics, not to mention drones, wearables and other devices. One survey found 68% of firms investing in artificial intelligence alone in 2024; those that do invest improve revenue and profit growth and deliver more projects on time and under budget.15
Even as more firms test the tech waters, they lack awareness of the heightened risk of cybercrime. Deep fake technology cyber criminals scammed an engineering firm out of $25 million in 2024 when bad actors posed as the company’s CFO, highlighting the need for ongoing training to help employees spot red flags and request additional verification before making costly mistakes.16
And HUB's survey found only 32% of construction firms have cyber insurance. One contractor, a HUB client, suffered a quarter-million-dollar fraudulent funds transfer incident but was reimbursed through cyber insurance only eight weeks after the event, proof that the coverage was well worth the investment.
In addition to training, a cyber incident response plan is key to securing adequate cyber coverage, yet three-quarters of construction firms lack one.17 Being proactive against cyber risk through multifactor authentication, cybersecurity training and protocols with a solid backup strategy makes businesses much more attractive to underwriters.
An insurance broker who specializes in construction has the knowledge and resources to identify and help address such exposures with creative solutions to balance the growing risks of technology with its lucrative rewards.
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Turning to tech in search of solutions.
4 | Technology
Navigating Your Next Steps
HUB construction insurance specialists will work with you to develop a tailored strategy for 2025.
1
Develop a comprehensive risk plan.
Making risk management a pillar of your organization’s culture can help identify exposures and develop response plans in case of any type of incident, whether that is a weather-related event, a threat of physical safety or a cyberattack. Make sure your broker understands how to approach risk and can identify gaps in insurance that could disrupt your daily operations.
Create a personalized benefits strategy.
2
To compete for a shrinking pool of skilled labor, personalized benefits based on HUB Workforce Persona Analysis and data analytics can help your company differentiate itself from the competition. Creating a quality employee experience (QEX) will boost engagement, improve recruitment and retention and promote worker wellbeing.
Safety is already the focal point of your operation, but with an influx of new and less-experienced workers, injury risks increase. Work with a risk professional to review your safety program at least annually and address any issues.
Remain focused on workplace safety.
3
Stay in contact with your broker and let them know about changes to the business to eliminate surprises at renewal. Review exposures and insurance needs at least 90 days prior to policy renewal to allow your broker to find the optimal coverages for your organization.
Be transparent with your broker.
4
Be Prepared
Download our 2025 Construction Outlook and Insurance Market Rate Report to see what to expect in the coming year.
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Kirk Chamberlain
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Risk Advisor
Shannon Crawford
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HUB Construction
When you partner with us, you’re at the center of a vast network of experts who will help you reach your goals. For more information on how to manage your insurance costs, reduce your risk and take care of your employees, talk to a HUB construction insurance specialist.
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$2.5B
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40,600
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134,000
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2 | Vitality
3 | Resiliency
4 | Technology
4 | Technology
3 | Resiliency
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2 | Vitality
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1 | Profitability
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One in five
construction workers is 55 years or older.
36%
The amount of additional time needed to work during excessive heat.
Only 32%
of construction firms have cyber insurance.
1. Results from HUB's Outlook Executive Survey, which polled 900 C-Suite and VP-level executives on the issues facing them on profitability, employee vitality and organizational resilience.
2. Statista.com, “New construction put in place in the United States from 2005 to 2023, with forecasts until 2028,” August 7, 2024.
3. American Institute of Architects, “Construction spending gains projected this year, expected to stall in 2025,” July 17, 2024.
4. Construction Dive, “Construction input prices drop for first time in 2024,” June 13, 2024.
5. MossAdams, “The Commercial Real Estate Debt Dilemma,” April 3, 2024.
6. Statista, “How Many U.S. Offices Are Empty?” July 11, 2024.
7. Construction Dive, “Construction’s labor shortage continues, despite dip in open jobs,” June 5, 2024.
8. U.S. Bureau of Labor Statistics, “Labor Force Statistics from the Current Population Survey,” accessed September 19, 2024.
10. NBC News, “Construction workers are dying by suicide at an alarming rate,” June 23, 2024.
11. Time, “Extreme Heat Is Endangering America’s Workers—And Its Economy,” August 3, 2023.
12. Bisnow, “’Adaptation Cost of Anguish’: How Extreme Heat Is Slowing Down Construction,” Sept. 5, 2023.
13. MileHigh CRE, “US Construction Outlook: Megaprojects will Define the Industry in 2024,” January, 2 2024
14. Axios, “Increasingly costly heat waves present insurance challenges,” July 16, 2024.
15. Deloitte, “State of Digital Adoption in the Construction Industry 2024,” April 18, 2024.
9. NewsNation, “America needs skilled workers; are apprenticeships the solution?” April 11, 2024.
16. CFO Dive, “Scammers siphon $25M from engineering firm Arup via AI deepfake ‘CFO’,” May 22, 2024
17. Construction Today, “Safeguarding the construction industry in the digital age,” October 23, 2023.
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© 2024 HUB International Limited. 150 N Riverside Plaza, 17th Floor, Chicago, IL 60606. All rights reserved.
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Keep pace with the latest trends.
Stay in the Know
Industry Outlooks
Retirement
Private Client
Personal Insurance Marketplace
Employee Benefits
Product Outlooks
Transportation
Real Estate
Nonprofit
Hospitality
Healthcare
Financial Institutions
Entertainment & Sports
Education
Construction
Cannabis
Agribusiness
North American Outlook
Learn more about us. Visit hubinternational.com