Until recently, insurance policies related to investment projects were often treated primarily as a formal contractual requirement. Today, they are increasingly becoming one of the key tools for protecting margins, liquidity, and project continuity. In a landscape marked by volatile material prices, supply chain tensions, rising contract values, and an increasing number of disputes, risk management is no longer a secondary concern. It has become an integral part of strategic decision-making as early as the investment planning stage.

So the question is not simply whether investment and contractor insurance is more expensive than before. What is more important is whether the lack of properly designed protection turns out to be a much higher cost today. In market practice, it is becoming increasingly clear that an insurance policy no longer serves merely as a safeguard after a loss occurs. More and more often, it structures the relationships between the investor, the general contractor, subcontractors, financiers, and the insurer, and thus becomes an integral part of modern risk management.

Why is the topic of investment insurance becoming more important?

In the construction and infrastructure market, the scale of risks is growing, which can result in direct financial losses or schedule delays. This applies to both property damage at the construction site and third-party claims, construction errors, equipment failures, weather-related incidents, and problems on the part of subcontractors. As a result, insurance is increasingly viewed not as an incidental cost, but rather as an integral part of a project’s safety framework.

The importance of this area is further reinforced by the expectations of financial partners as well as public and private contracting entities. In many procurement processes, the scope of coverage, the sum insured, and the terms of liability have become a key factor in assessing a contractor’s ability to fulfill a contract. In practice, this means that insurance policies affect not only operational safety but also market competitiveness.

When analyzing these phenomena, it is advisable to rely on current market data—as contained in periodic industry reports—which provide a better understanding of cost trends, purchasing practices, and the evolving expectations of market participants. Reports published by PMR Market Experts enable insurance decisions to be placed within a broader sectoral context.

Is the rise in insurance premiums a temporary phenomenon?

Several factors simultaneously influence the level of premiums. Key factors include rising investment values, higher property replacement costs, greater frequency and scale of losses, as well as insurers’ more cautious approach to assessing risk exposure. As a result, construction companies and developers are increasingly faced with more detailed risk assessment requirements, a greater number of exclusions, and higher deductibles.

However, this does not necessarily mean a sustained upward trend. The cost of the policy depends heavily on the quality of the risk documentation, the claims history, safety standards on the construction site, the structure of contracts with subcontractors, and the scope of coverage selected. Entities that actively manage risk and are able to describe it effectively typically have more room to negotiate terms.

What most often drives up the cost of insurance coverage?

In practice, there are several recurring causes of cost increases. Some of them stem from the market environment, while others are related to the internal organization of the project. The most commonly observed factors are:

• an imprecisely defined scope of work and responsibilities of the contracting parties,
• poor quality of safety plans and risk control procedures on the construction site,
• no current data on assets, equipment, and the stages of the project's implementation,
• a high historical loss ratio or a failure to take corrective action following previous incidents,
• an extensive subcontracting chain without uniform insurance standards.

From a management perspective, this means that it is possible to have a real impact on some of the costs. The premium itself is the result of a risk assessment, not just a price list. The better the risk is identified and documented, the greater the chance of receiving a more appropriate quote.

What types of insurance are most important for investments today?

In construction and infrastructure projects, CAR (Contractors’ All Risks) and EAR (Erection All Risks) policies, contractors’ liability insurance, property and construction equipment insurance, as well as coverage related to design errors or professional liability. In reality, however, this is not simply a matter of purchasing a few separate policies, but rather of aligning them coherently with the structure of the investment.

What matters most is whether the scope of coverage corresponds to the actual risk areas of the project. An industrial investment requires a different approach than a residential project, which in turn differs from that of linear infrastructure. This is because both the profiles of potential losses and the relationships among the parties involved in the investment process vary.

How do you choose an insurance policy that fits the stage and type of your investment?

The biggest mistake is copying solutions from previous contracts without analyzing the specific characteristics of the new project. The risks at the design stage differ from those during the earthwork phase, system installation, or technological commissioning. Therefore, the insurance policy should be updated as the project progresses.

It’s a good idea to organize the process by answering the following questions:

1. What kinds of damage might occur at a given stage of implementation?
2. Which parties bear contractual liability for specific events?
3. What are the potential consequences of a delay, failure, or suspension of work?
4. Does the scope of coverage correspond to the replacement value and current exposure?

This approach helps avoid both underinsurance and purchasing coverage that does not meet the project’s actual needs.

Do the investor and the contractor view insurance in the same way?

Not always. For an investor, the priority is usually the continuity of the project, protecting the asset’s value, and minimizing the risk of disputes that could affect the project’s completion date. For the contractor, financial liquidity, the ability to handle claims, and protection against the consequences of their own errors and those of subcontractors remain equally important. If these perspectives are not agreed upon early enough, the policy may not resolve key issues when a loss occurs.

This is precisely why consistency between the terms of the contract and the insurance documentation is becoming increasingly important. Discrepancies in the definitions of loss, liability, disclosure obligations, or the scope of recourse can significantly complicate the claims settlement process. Therefore, during the negotiation phase, it is advisable to treat the insurance policy as part of the contract documentation rather than as a separate administrative attachment.

Where do the most common security vulnerabilities occur?

Most problems usually stem not from a complete lack of insurance coverage, but from the terms of the policy not being aligned with the realities of the investment. This is particularly true in situations where several parties assume that liability will be assumed by another party to the contract or by another insurance policy.

The most common vulnerabilities include:

• an ambiguous definition of who is responsible for temporary property and construction site facilities,
• the omission of some subcontractors from the security structure,
• definitions of damages related to construction defects that are too narrow,
• insufficient protection during the testing and commissioning phases,
• a lack of coordination between the investor's policy and the contractors' policies.

This means that it is necessary to regularly review the scope of coverage not only when signing a contract, but also when there are changes to the scope of work, the schedule, or the contractor structure.

How does insurance affect strategic decisions and project valuation?

In many construction companies, insurance costs are still recorded as just one of many components of project costs. Increasingly, however, it should be analyzed more broadly—as an indicator of risk management quality and a factor influencing bidding strategy. If risks are properly identified, it becomes possible to calculate the contract price, safety margin, and required working capital more precisely.

When does this matter? Especially in long-term projects, where uncertainty regarding damages, liability, and delays can affect profitability even when construction costs are accurately estimated. In such situations, market forecasts can be valuable, as they help assess trends in the cost and regulatory environment and adjust risk policies to the outlook for the coming quarters.

In Polish insurance risk analyses, dedicated studies conducted by independent research agencies—such as Hume’s Institute—can provide tangible support for strategic decision-making. They help to correlate observations from the executive market with a broader picture of economic, investment, and cost trends.

How can you reduce insurance costs without increasing your risk exposure?

The most effective approach is not to mechanically reduce the scope of coverage. Short-term savings can result in damages or litigation costs that are many times higher. A better solution is to improve the quality of risk management, as this influences the insurer’s assessment and the company’s negotiating position.

In practice, it is worth implementing several organizational measures:

• update the risk map for each significant stage of the investment,
• standardize the requirements for subcontractors regarding liability and insurance policies,
• document preventive measures, audits, and safety procedures,
• analyze the claims history in terms of root causes, rather than just the amount of payouts,
• Integrate insurance decisions with contract calculations and the business continuity plan.

In more complex cases, it’s worth seeking outside assistance. Well-prepared consulting allows you to combine contractual, financial, and market perspectives, which often leads to a better-tailored coverage solution than the standard purchasing process.

Is insurance becoming the new standard for risk management?

There is growing evidence that this is indeed the prevailing trend. Insurance does not replace risk management, but is becoming an integral part of it. In mature organizations, the decision regarding the scope of coverage is linked to contract analysis, investment profile, procurement strategy, subcontracting policy, and financing model. Only then does the policy strengthen the project’s resilience rather than serving as a mere formality.

The way contractors are evaluated is also changing. It is not only price and experience that matter, but also the ability to anticipate risks, prepare contingency plans, and safeguard the interests of all parties involved in the investment. From this perspective, the growing importance of insurance is not a passing trend, but a consequence of the increased complexity of projects and the market’s lower tolerance for unforeseen disruptions.

Key Findings

Investment and contractor insurance should increasingly be viewed not as an additional cost, but as a measure of risk management quality. The scale of these expenses is determined not only by market conditions, but also by how the project is prepared, the quality of procedures, and the consistency of the contract documentation with the terms of the policies:

• Security costs rise where risks are poorly identified or inadequately documented,
• The biggest gaps usually arise at the intersection of the responsibilities of the investor, the contractor, and the subcontractors,
• An effective insurance policy should be tailored to the type of investment and the stage of implementation,
• Insurance is having an increasingly significant impact on project pricing, liquidity, and the ability to secure contracts,
• The new market standard is based on combining insurance coverage with active risk management.

How can PMR Market Experts support your strategy?

Do you want to better understand how changing market conditions affect investment profitability, risk policy, and operational decisions? Let’s talk—an accurate market assessment and the proper application of industry data to the realities of your project help you make decisions with greater confidence.30.

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Hume’s Institute stands for knowledge. PMR Market Experts stands for experience. When we join forces, you gain a competitive edge. See how we can support your business.

Hume’s Institute stands for knowledge. PMR Market Experts stands for experience. When we join forces, you gain a competitive edge. See how we can support your business.

Dariusz Śmiejkowski

Chief Executive Officer