Arch Construction Risk Report Reveals Top Challenges Facing Sector Amid Rising Volatility

Growing complexity and interconnected risks driving up insurance spend in construction.

LONDON--(BUSINESS WIRE)--Arch Insurance International (Arch) today published its inaugural Construction Risk Report, revealing how geopolitical instability, supply chain disruption, climate change, funding and inflationary pressures, and emerging technologies are increasing levels of project risk.

Based on insights from risk and insurance managers at leading property owners, developers and contractors worldwide, the report reveals that almost 85% of respondents reported at least a moderate increase in risk exposure over the past 12 months. Geopolitical instability emerged as the top risk, cited by 59% of respondents, followed by supply chain disruption (52%) and weather and climate-related events (36%). Cyber breaches and funding and inflationary pressures completed the top five.

Tim Chapman, Head of Construction, said: “Construction risks are growing more interconnected, making project delivery more challenging and loss scenarios more complex. Insurers have a key role to play in supporting stronger risk assessment and helping clients understand their evolving exposures.”

Geopolitical Instability

Geopolitical risk has emerged as a significant concern for the construction sector, influencing procurement decisions, project planning, budgeting and investment strategies. Conflict and government policy were identified as the most material threats, each cited by 53% of respondents.

Stephen Convery, Senior Underwriter said: “Although geopolitical instability has not yet driven a significant increase in construction-related insurance claims, its influence is being felt across the industry. Conflicts such as those in Iran and Ukraine are a stark reminder of just how suddenly events can materialise and how quickly their impact can be felt across global markets.”

Supply Chain Disruption

Supply chain disruption remains one of construction’s most significant and persistent risks. Organisations reported vulnerabilities across multiple areas, including specialist components (59%), raw materials (56%), logistics (47%), subcontractor labour (41%) and transportation (41%).

Kevin Lumiste, Senior Construction Underwriter, adds: “Delay risk is becoming one of the biggest challenges facing construction projects today. As lead times for critical equipment extend, contractors are being forced to procure, transport and store materials much earlier than planned, creating a new set of exposures that must be carefully managed from both a project and insurance perspective.”

Weather and Climate-related Risks

Weather and climate-related risks are now a prominent part of the sector's risk profile, with more than three-quarters of respondents reporting increased exposure over the past five years. Flooding was the leading risk (82%), followed by severe convective storms and heatwaves. These hazards are increasingly disrupting project delivery, with 71% of respondents citing more weather-related delays than five years ago.

“Once a secondary concern, flood risk is now a core issue for construction projects, driven by more frequent extreme rainfall events, flash flooding and loss incidents. This is placing greater focus on robust flood risk assessments, mitigation planning and project-specific resilience,” says Chapman.

Emerging Risks

While familiar challenges persist, organisations are contending with newer risks. Labour availability topped emerging concerns, with 60% of respondents reporting it had moved up their risk registers in the last 2-3 years. New technologies, modern methods of construction and the drive to net zero, whilst positive developments, are also introducing new exposures to navigate.

Increased Resilience Investment

Construction organisations are responding proactively to these growing challenges. Two-thirds of respondents reported a moderate or significant increase in risk and insurance spend over the past year, while almost three-quarters have increased project contingency allowances over the past five years in response to heightened uncertainty around project costs and delivery.

Chapman said: “The findings point to a clear evolution in the risk landscape facing construction projects, highlighting the need for organisations to reassess their risk management and insurance strategies. Closer collaboration between insurers, brokers and clients is critical. Through earlier engagement and embedding resilience into every stage of project planning and delivery, the industry can continue to adapt, embrace innovation and build a more robust future.”

About The Report

The Arch Construction Risk Report is based on a survey conducted between April and May 2026, covering six areas: geopolitics; climate-related events; emerging risks; supply chain; funding & inflation; and net zero & emerging technologies.

To access the full report, please click here.

TAG WORDS

Arch Insurance International, construction, geopolitics, supply chain, climate change, emerging risks, flood, Tim Chapman, Stephen Convery, Kevin Lumiste

EDITOR’S NOTES

About Arch Insurance International

Arch Insurance International is part of Arch Capital Group Ltd. and includes Arch Insurance UK and the P&C insurance operations of Arch Insurance (EU) dac, as well as Arch’s insurance operations in Europe, Bermuda and Australia.

About Arch Capital Group Ltd.

Arch Capital Group Ltd. (Nasdaq: ACGL) is a publicly listed Bermuda exempted company with approximately $28.3 billion in capital at June 30, 2026. Arch, which is part of the S&P 500 Index, provides insurance, reinsurance and mortgage insurance on a worldwide basis through its wholly owned subsidiaries.

Cautionary Note Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward−looking statements. This release or any other written or oral statements made by or on behalf of Arch Capital Group Ltd. and its subsidiaries may include forward−looking statements, which reflect the Company’s current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this release are forward−looking statements.

Forward−looking statements can generally be identified by the use of forward−looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” or their negative or variations or similar terminology. Forward−looking statements involve the Company’s current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes the following: adverse general economic and market conditions; increased competition; pricing and policy term trends; fluctuations in the actions of rating agencies and the Company’s ability to maintain and improve its ratings; investment performance; the loss of key personnel; the adequacy of the Company’s loss reserves, severity and/or frequency of losses, greater than expected loss ratios and adverse development on claim and/or claim expense liabilities; greater frequency or severity of unpredictable natural and man-made catastrophic events, including the effect of contagious diseases on our business; the impact of acts of terrorism and acts of war; changes in regulations and/or tax laws in the United States or elsewhere; ability to successfully integrate, establish and maintain operating procedures as well as integrate the businesses the Company has acquired or may acquire into the existing operations; changes in accounting principles or policies; material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements; availability and cost to the Company of reinsurance to manage our gross and net exposures; the failure of others to meet their obligations to the Company; an incident, disruption in operations or other cyber event caused by cyber attacks, the use of artificial intelligence technologies or other technology on the Company’s systems or those of the Company’s business partners and service providers, which could negatively impact the Company’s business and/or expose the Company to litigation; and other factors identified in our filings with the U.S. Securities and Exchange Commission (SEC).

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. All subsequent written and oral forward−looking statements attributable to us or persons acting on the Company’s behalf are expressly qualified in their entirety by these cautionary statements. The Company’s forward-looking statements speak only as of the date of this press release or as of the date they are made, and the Company undertakes no obligation to publicly update or revise any forward−looking statement, whether as a result of new information, future events or otherwise.

Source: Arch Insurance (UK) Limited