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3 in 1 global construction news

3 in 1 brings you three updates from the Marsh Risk global construction practice in under a minute.

06/04/2026 · 3 minute read

Paul Knowles, Global Construction Chairman, shares the latest insights for construction.

1: Key takeaways from the Q1 2026 Construction Market Update

The construction industry continues to drive economic growth, but the risk landscape in 2026 is more complex than ever.

Geopolitical tensions, changing trade dynamics, and uneven economic conditions are impacting project pipelines, costs, and contract performance. How the insurance industry adapts to these challenges is crucial for maintaining economic stability across construction and related sectors.

Marsh's Construction Market Update Q1 2026 offers an in-depth regional analysis of insurance capacity, pricing, coverage, and underwriting trends in response to this evolving environment.

2: Our digital infrastructure expertise: Managing accelerating construction risk across the ecosystem

Marsh is playing a leading role in enabling the technology sector to meet growing demand for data center infrastructure.

Our clients are building data centers with pace, creating a unique and emerging risk profile that requires a holistic yet standardized insurance philosophy.

Our experience and technical expertise, combined with our global network, means we’re well positioned to support our clients on their growth journey.

We’re already putting this to good use. In the video below we showcase how we’re helping digital infrastructure owners and developers across the acquisition, development, and operational phases of their projects.

3: The value of replacement cost valuations

When a project moves from construction into operations, the insurance sums used for the new policy need to reflect what it would actually cost to rebuild or reinstate the asset today — not simply the money that was spent during construction.

The contract price recorded during build is a historical figure influenced by negotiated rates, owner‑supplied items and project‑specific allowances; replacement cost is a forward‑looking estimate that captures current materials and labor prices, updated codes and regulations, reinstatement‑specific activities (demolition, debris removal, temporary works), and professional fees. Because markets, supply chains and regulatory requirements change, relying on the historic build cost is a common source of underinsurance and dispute.

Using a replacement cost valuation at practical completion and again at handover gives both owners and insurers a clearer, defensible baseline for the operational policy. Owners benefit because the policy limit is more likely to match the real cost to restore operations after a loss, reducing the likelihood of pro rata reductions and the uncertainty that comes with them.

Insurers benefit because exposures are more accurate, pricing and reserving improve, and fewer claims become mired in valuation disagreements. Agreed valuations also support more consistent underwriting across similar accounts, which helps with benchmarking and long‑term portfolio management.

Good replacement cost work is practical: it’s done by valuers who know construction and insurance reinstatement, who understand local market conditions and who document assumptions clearly. The valuation should cover the whole reinstatement picture — structure, fixed plant and machinery, site works, regulatory upgrades, demolition and cleanup, professional fees, and any temporary accommodation or business‑continuity measures that would factor into recovery.

For long‑lived assets or volatile markets, include indexing or scheduled revaluations so values don’t erode with inflation or code changes; a single valuation at handover is often not enough.

There are a few pitfalls to watch for. Taking the contractor’s final account at face value can miss owner‑supplied items or reinstatement allowances; soft costs such as permits and consultant fees are easily overlooked; and code or sustainability upgrades can increase replacement cost substantially. Practical examples are useful: a plant built to an older standard might need costly new fire‑safety systems to meet current codes, or a sudden jump in steel and labor prices between completion and policy inception can leave the historic build cost well short of what it would take to rebuild.

Recommendations:

  • Treat replacement cost as the default basis for operational sums insured, commission specialist valuations at practical completion and at handover with transparent assumptions and agree indexing or routine revaluations in the policy for longer‑lived assets.
  • Early conversations between project teams, valuers, brokers and underwriters mean valuation outcomes are understood and priced into cover before handover.

Marsh’s Operational Risk Consulting team brings construction knowledge, market valuation techniques and insurance reinstatement experience together to deliver defensible replacement cost valuations at the right milestones.

That simple distinction — construction cost is not the same as replacement cost — is one of the most effective ways to reduce underinsurance, smooth claims and create fairer outcomes for both insureds and insurers.

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Paul Knowles

Global Head of PEMA, Chairman of Global Construction

  • United States

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