By Craig Tappel and Kirk Chamberlain

What may end up being the best thing about 2021 is that it’s no longer 2020. For many industries, though, that may be cold comfort given the remaining business and financial uncertainties and the challenges of rebuilding from 2020’s damage. And, so it goes for construction.

Early in the year, the economic shutdown caused many projects in the bidding or final stages to be delayed, even though “essential” construction and its workers carried on throughout most of the country. Projects struggled through supply chain disruptions and work interruptions when subcontractors couldn’t report to work due to quarantine requirements or inability to meet health mandates.

It’s leading some experts to predict a 6.5 percent contraction in the U.S. construction industry in 2020 and 2.0 percent in 2021. The upheaval has left balance sheets battered, forcing many contractors to stretch to regain their financial health. They also will be challenged on a different front—insurance renewals. Underwriters are likely to eye their financials closely along with other short- and long-term risks, plus the industry faces the added pressure of a hardening insurance market, where rates trend higher as availability tightens.

 As we head into 2021, contractors should be aware of three areas of greatest risk and ways to offset the worst effects. 


Pandemic-driven forces have weakened balance sheets and compressed profit margins. Such costly repercussions hurt even those starting 2020 off on a fairly strong financial footing. Trying to catch up on delayed jobs and other unbudgeted costs stemming from COVID closures and schedule delays have taken a toll. 

Another issue continuing to hang over their heads (and balance sheets) is the level of forgiveness they can expect from Paycheck Protection Program (PPP) loans granted under the federal CARES Act. The construction industry received $64.6 billion in loan approvals across 466,221 applications for an average of $138,560 per loan.  

Through it all, another concern has risen to the top—the mounting financial and operational risk of contract performance default. Subcontractor defaults, in particular, were a common and costly problem before the pandemic; some, typically larger general contractors, have opted for Subcontractor Default Insurance (SDI) instead of the more traditional surety bonds to cover losses on subcontractor performance. 

However, those who have assumed sole responsibility for prequalifying their subcontractors may be in a more precarious financial position, typically assuming a significant “first loss” deductible under their SDI program. Contractors opting for subcontract surety bonds, on the other hand, will be better off on this front at least, as the bonds involve third-party prequalification and transfer all the financial risk to the Surety.

The pressures give rise to several precautionary notes on the insurance front, not the least of which is to engage a broker with sufficient expertise in construction and its risks and protections. In this environment, it’s important to keep an eye on the SDI and surety markets. Carriers in both lines may be less rate-driven than other coverages when claims are mounting, but they do restrict capacity, tighten their policy terms, and hike their deductibles. 

Overall, as the market hardens, carriers will also become choosier over their insureds. Self-marketing, risk management, record tracking, and safety success become a must for subcontractors with SDI, surety, and other insurance types. At the same time, general contractors must demonstrate how they uphold quality and safety on the jobsite. Quality is an increasingly important risk selection factor for insurers, making quality tracking and measurement systems necessary for continuous improvement. 


Even with vaccines, too many uncertainties remain for people to forego masks and observe social distancing. To that end, contractors should be diligent in enforcing their on-the-job mask and social distancing requirements and other jobsite safety measures—vaccine or no. Exposures on the job are bound to result in “standard” workers’ compensation claims, and come with a twist: Class action lawsuits for “willful employer misconduct” under Part B of these policies are unusual, but on the rise, with claims alleging that employers allowed unsafe conditions resulting in workers getting sick or dying from COVID. In addition to workplace safety, the pandemic will continue to inflict pain on the industry’s supply chains into 2021, with “knock-on” effects on budgets and schedules. The challenge will be to balance resilience and efficiency as contractors work to secure their supply chains in this environment.

To keep construction sites safe during the pandemic, contractors can get comprehensive measures from the Occupational Safety and Health Administration (OSHA) site. Their brokers can also help them integrate COVID safety with other site safety measures.


Even before the pandemic, the construction industry has had performance issues. Globally, the industry has experienced a 40-year decline in productivity, and a shocking 30 percent of every construction dollar is lost to waste and rework. 

While it has been slow to embrace technology’s potential, the pace has stepped up in the last few years and the industry has seen payoff ranging from streamlined processes to improvements in worker productivity, safety, and quality. That’s only going to accelerate in the next 3 to 5 years. Skyrocketing by 239 percent, drone use is doing some work more safely than humans can, and 24/7 onsite security is offsetting the industry’s losses of $300 million to $1billion in annual construction equipment theft. 

Of course, the downside of technology is the connectivity issue and the increasingly big cyber risk issue. Over 75 percent of industry respondents told one survey they’d been victimized—no surprise given the notable uptick in cyber claims. Of particular danger to construction is social engineering. A cyber-criminal impersonates senior management or vendors using business email compromise tactics, resulting in the release of money or valuable information.


Balancing the benefits and risks of technology is critical, and it starts with putting security policies and procedures in place—and making sure they are followed. Periodic audits of cybersecurity environments can be helpful on that front. It’s also essential to ensure adequate insurance coverage. While it may be easy to buy a policy that blends cyber with professional liability insurance, the protection against cybercrime is more limited than through a stand-alone cyber policy. (And, terms and conditions would be better, too.) However, be aware that in the hardening insurance market, rates for cyber insurance are expected to rise by 30 percent or more. 

About the author:

Craig Tappell is the chief sales officer for global insurance brokerage HUB International’s construction specialty practice. Kirk Chamberlain is EVP, national construction practice leader and chief marketing officer. For more, visit

Modern Contractor Solutions, March 2021
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