Numerous uncertainties are setting the remainder of 2026 to be another challenging year for the U.S. construction industry.
The cost of materials, for example, remains under pressure given a supply chain impacted by the government’s unpredictable tariff policy. The labor supply is a long-standing concern that is strained by current immigration policy. Weather extremes are also intensifying, posing safety risks and project delays.
While some bright spots can be found in the forecast, making the most of opportunities while managing the risks won’t be easy. Here’s a look at what the new year holds.
Cost Management Remains a Strategic Priority
One of the industry’s most intense pain points in 2026 is effective cost management when material prices are volatile and aggravated by tariffs. These costs have risen steadily, by 34%, since December of 2020.
Rising costs by themselves are only part of the problem. Volatility impacts insurance valuations and project financing between the bid phase and completion. One common solution is to stockpile materials as a hedge against future hikes, which takes careful planning. Despite the buffer against sudden cost surges, the strategy also shifts cash flow and raises working capital requirements.
Another concern is the long-standing and worsening labor shortage. Between the demand for new employees and retirements, some 349,000 workers are needed this year, according to an Associated Builders and Contractors January report. Further, current immigration enforcement has intensified the pressure, adding to the cost. Work schedules have been affected, for example, and 45% of construction firms say project delays will be one result.
On the positive side, interest rates are expected to drop, which will help restart stalled projects. Contractors that have capitalized on the build-to-rent trend have also benefited with revenues that aren’t dependent on mortgage rates. Surging demand for artificial intelligence has created another avenue for growth with data center construction, but these projects also come with more complex insurance challenges. On another front, private equity interest in the construction business brings in new capital, as well as new expectations by investors.
Contractors that expect to thrive should partner with experienced brokers to navigate a tough environment. Creative risk-sharing solutions are essential to participate in the data center market. Project-specific solutions, including owner-controlled insurance programs, will help manage costs while providing adequate coverage to satisfy lenders and other stakeholders.
Addressing the Strained Construction Workforce
Construction firms face intensifying pressure on every front with labor. The workforce is aging, with over 20% at 55 years old or older. Less than 3% of young people see construction as a career option. Climate risks like record-breaking heat jeopardize the health and safety of crews, which also discourages potential new workers. Immigration policy may be the year’s biggest wild card, especially in states with large numbers of immigrant workers like Texas, Florida and California.
Employee well-being must be a top priority in order to protect existing workers and to emphasize a firm commitment to a healthy and safe workforce. By embracing heat safety rules, for example, contractors will see fewer work disruptions and strengthen their brand reputation. Investing in wearable safety devices and wellness programs will reduce insurance claims and build trust.
A comprehensive and personalized benefits program is an increasingly important differentiator, one that 73% of employees say would make them stay with their current employer. What’s particularly needed are benefits that include well-being programs with extended mental health and retirement resources.
By investing in early training on worker safety along with health programs, employers will reduce injuries and their exposure for workers’ compensation claims and third party “action-over” contractual lawsuits.
Risk Management Improves Resiliency
Weather disruptions resulting from climate change are having a profound impact on the construction industry, requiring firms to sharpen their risk management practices. Extreme heat, for example, is increasingly the rule, not the exception: U.S. temperatures were the fourth highest on record in 2025.
Knowledgeable brokers are increasingly important guides, both for strategies to better analyze the scope of climate risks and for securing appropriate coverage limits. Advanced analytics, for example, show periods that are vulnerable to catastrophic loss in a project’s lifecycle. Predictive planning also enables brokers to structure coverage for regional weather patterns and seasonal variations, building long-term resilience.
Augmenting traditional insurance with alternatives that address coverage gaps is important. Parametric insurance is a useful support, with a payout when a specific weather metric occurs, that supplements coverage for risks that may otherwise be uncovered.
The boom in AI data center construction jobs presents opportunity that must be balanced with informed risk management strategies. These are not simple warehouse projects, but complex industrial projects that include added infrastructure like dedicated adjacent power stations when overwhelmed power grids could delay project delivery. This requires sophisticated coverage structures and risk management strategies, especially as exposures like cyber liability and equipment breakdown are being closely examined by underwriters.
As 2026 advances, construction firms can position themselves to effectively manage the challenges by following a tailored strategy built around construction insurance, employee benefits and risk management. A comprehensive risk plan should be a cultural pillar, with workplace safety a top priority. A personalized benefits strategy will be a big differentiator. Knowledgeable insurance brokers will be essential for creating an optimal program for success.
