Contractors continue to face tough conditions where risk is concerned. Labor issues, contract challenges, logistics headaches and economic volatility all plague business owners. These issues hamstring insurance providers as well, believe it or not. Both sides of the insurance desk are getting crafty in searching for coverage solutions to even the most complex and highest-risk transportation construction projects.
Pressure is increasing on both contractors and their insurance providers to zero in on "robust risk mitigation strategies" to improve insurance programs.
A willing and healthy insurance market is a necessity if public infrastructure projects are to be built, wrote Michael Bradford of riskandinsurance.com.
"Insurance is absolutely critical," Bradford quoted Aldo Fucentese, chief underwriting officer of Liberty Mutual's practice serving large contractors. "A lot of different lines come into play, and, if you don't have surety capacity, you can't even get started."
Industry Continues to Navigate Choppy Seas
Risk management firm Marsh polled contractor clients and found that construction entities use a range of methods to address risk.
They're sharing risks with suppliers and subcontractors; negotiating stronger contract terms; and increasing risk cost contingency budgets, the firm blogged.
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"Risk conditions remained challenging for contractors in the first half of 2025," posing "significant" threats to project timelines and budgets, it noted. "Contractors are increasingly confronted with the dual challenge of managing rising costs while maintaining competitive bids."
Marsh learned that United States construction contractors' top three risks are related to labor, finances and the supply chain. The firm said attracting and retaining skilled workers remains the top concern for the domestic construction industry.
That said, more than half of the contractors surveyed indicated they intend to increase staffing levels over the next six months, noted Marsh.
Businesses want the best talent, but there are barriers to attracting younger workers, including the physically demanding nature of many construction jobs. That, coupled with potentially hazardous working conditions and limited career advancement opportunities, has younger workers ignoring the career field.
"Additionally, the lack of flexible work arrangements and the need to travel to job sites may further deter qualified candidates," wrote Marsh.
These challenges force contractors to get inventive when it comes to attracting skilled workers. Investments in training and development, apprenticeships and mentorship programs and continuing education opportunities are solutions that empower.
"Further, creating a strong safety culture and prioritizing employees' health can help foster loyalty and reduce turnover rates," said Marsh. "Investing in technology can also help make construction careers more appealing, particularly to tech-savvy younger workers."
Marsh noted that as the size and complexity of construction projects grow the financial stakes for contractors also escalate.
In competition, many firms wind up bidding on projects with incomplete information, committing to pricing based on a fraction of the design documents.
"This practice can lead to unrealistically low bids resulting in substantial losses," said the firm. Cost overruns can erode profits and jeopardize finances.
"In some cases, contractors may attempt to recover a portion of losses through change orders," straining relationships and leading to disputes, blogged Marsh.
As projects become more capital-intensive, contractors increasingly rely on loans or lines of credit to fund operations.
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A comprehensive understanding of financial risks and a robust strategy to manage and transfer becomes more critical for sustaining growth and profitability.
"Delay in startup (DSU) coverage, for example, can protect against financial losses resulting from project delays," said Marsh.
This in turn helps contractors recover lost income due to unforeseen interruptions.
"Having a robust insurance program can also enhance a contractor's creditworthiness," according to the firm's blog post.
That's because lenders often view comprehensive coverage as a sign of financial responsibility, it said.
Often unpredictable supply-chain issues that can disrupt projects call for a proactive approach to supply management, said Marsh. That includes a clear understanding of both direct and upstream suppliers, and the risks associated with sourcing materials from various locations.
"Transparency and regular communication with suppliers can facilitate the anticipation of potential disruptions," said the insurance provider.
Establishing strong relationships with suppliers and gaining insight into their operations, capabilities and potential vulnerabilities, can help with both.
Identifying risk early on enables the development of contingency plans, said Marsh. Contingencies, in turn, can mitigate the impact of project disruptions.
"For example, if a supplier is experiencing delays in securing critical materials, contractors can explore alternative sourcing options."
They also can seek to adjust project timelines to minimize setbacks, suggested the blog post.
"Diversifying suppliers can reduce reliance on a single source, with the added benefit of allowing contractors to potentially negotiate better pricing."
Better pricing could ultimately contribute to improved project outcomes, it said.
"Further, knowing the geographic location of both direct and upstream suppliers can help identify and address aggregation risks."
Marsh believes a robust insurance program is essential, given the ability of complex supply chains to increase the risk of losses.
"Cargo coverage, for example, can safeguard materials and equipment during transit, helping contractors recover losses if damage is sustained."
DSU coverage can provide financial protection against losses incurred due to project delays caused by supply chain disruptions, according to the blog post.
Your Broker Is in the Boat With You
Contractors rely heavily on insurers to finish transportation construction projects. When these issues crop up, the underwriting community is there.
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Bradford of riskandinsurance.com talked with Marcus Henthorn about infrastructure in particular.
"There are quite a few headwinds right now when it comes to getting infrastructure off the ground, and, obviously, to insure it properly," said Henthorn.
The managing director of insurance provider Gallagher said the risks faced by contractors make it harder to understand their true exposure. This includes when a project is going to finish and what it'll ultimately look like, said Henthorn. "That concern translates into the underwriting community."
The potential for catastrophic weather means geography and project type are key factors in how underwriters few infrastructure projects, said Henthorn.
In the Risk and Insurance article, he said issues such as contaminants make wastewater and stormwater systems difficult to insure.
"Some of the dams, bridges and tunnels are starting to be more scrutinized, with some special underwriting and more questions," Henthorn said. "It's more time consuming from a placement perspective, but it's not that there isn't adequate coverage in the marketplace."
Tamika Puckett said brokers and insurers are concerned with infrastructure risks in major metropolitan areas that could be vulnerable to natural catastrophes.
Puckett is the national public sector division leader of insurance provider Willis Towers Watson.
Wherever airports and public works projects are seemingly ongoing, arranging coverage for tight infrastructure is a hunt for capacity, she said.
"You only have so many carriers that are willing to insure large mega-projects," she said in Bradfords' Risk and Insurance article. "Putting together sufficient limits can be difficult if several projects need limited insurance capacity."
One solution brokers have found is to ask others to take larger shares of coverage on infrastructure projects, said Darron Johnston of insurer Amwins.
Finding adequate liability coverage for infrastructure projects has been a particular problem, per Aldo Fucentese of Liberty Mutual.
"That has probably been the biggest pain in the market," said Fucentese, chief underwriting officer of the firm's practice serving large contractors.
U.S. insurers hesitate to cover a class of business known for attracting litigation that sometimes results in huge awards, he said.
Bradford noted in his post that the cost of construction has risen dramatically in recent years. That and the economy make costs a big concern for public entities.
Kevin McDowell, vice president of Arch Insurance, said that fitting those needs into established budgets can be difficult for public entities.
"Market dynamics driving increases in costs of construction will be a challenge for public owners."
From the insurer's perspective, the goal is to ultimately deliver a better product to the construction client, said Johnston.
"As the public entity sector is dealing with some of this heartburn right now, we're all working to generate more capacity that can support this space."
Fucentese noted that the excess and surplus lines market can step in when admitted insurers pull back. But contractors should carefully study these insurers.
"You have to be very careful about how the policy is built and what type of exclusions you have," he said. "Coverage might be cheaper, but it might not provide all the coverage you need."
Insurers that offer surety bonds guaranteeing jobs are done according to specifications and everyone gets paid are finding plenty of opportunity.
That bodes well for contractors as there is plenty of capacity available in the surety market, said Stephen Ruschak, executive vice president of Arch Insurance.
But the bottom line is the risk landscape is difficult, said insurance provider Marsh. Complex bidding and contracting add to the list of threats.
So do elevated challenges due to severe weather events and the potential repercussions of cyber threats. These factors, beyond labor, finances and the supply chain, underscore the need for proactive risk management strategies, said Marsh.
"There is a growing imperative to strengthen risk mitigation efforts and optimize insurance programs." CEG
