February 20, 2026

Construction Outlook 2026: Preparing for risk, positioning for growth

Rutherford

The construction industry is facing a challenging mix of economic volatility, labor constraints and climate-related risks in 2026. At the same time, new opportunities are emerging for those who are able to take advantage. Contractors that take a proactive approach to cost control, workforce strategy and risk management will be better positioned to maintain profitability and stability in the year ahead.

PROFITABILITY-RELATED STRESSORS

Materials pricing remains volatile, partly as a holdover from pandemic-driven uncertainty and partly driven by changing tariffs. These fluctuations complicate everything about the construction business, from bidding to insurance valuations and project financing, particularly for bigger projects where costs can change substantially over time.

As a result, many contractors are pre-purchasing and stockpiling materials in advance. While this approach increases working capital demands — as well as storage space — it can help protect against sudden price spikes and supply chain disruptions.

Prepare for Risk: A comprehensive risk plan is essential in this environment. Identify exposures, such as procurement practices or pre-purchasing opportunity, and develop response plans in case of incident. A complete risk plan includes proactive claims management and risk mitigation protocols to minimize losses before they happen.

LABOR-RELATED STRESSORS

With nearly half a million jobs to fill, the labor shortage persists in 2026. But there are new sources of stress, too, with immigration enforcement actions and a shrinking number of younger workers also contributing to workplace disruptions. The result is longer project timelines and increased risk.

Those workers who do make it to a jobsite face even greater challenges, with organizational leaders focusing on worker safety and employee wellbeing. Construction continues to face elevated injury rates, which in some regions are compounded by the risks of extreme heat and severe weather. Firms that prioritize safety programs, training and compliance can reduce claims exposure while improving productivity and employee retention.

Prepare for Risk: Attract and engage employees through personalized benefits, wellness initiatives and mental health resources, as each differentiate your construction firm from the competition. Enhance safety programs, training and compliance efforts annually to address any gaps. Offer personalized benefits, wellness initiatives and financial education to improve recruitment and retention.

CLIMATE-RELATED STRESSORS

Extreme weather is now a leading cause of construction delays, with heat, storms and flooding impacting a growing percentage of projects. These risks are receiving increased attention from insurers, particularly across auto liability, umbrella coverage and climate-exposed builder's risk policies.

Prepare for Risk: In response, firms are leveraging advanced weather analytics, predictive scheduling and alternative risk solutions such as parametric insurance. While not a replacement for traditional coverage, these tools can help manage cash flow disruptions and reduce downtime following weather-related events. Incorporate weather analytics into project planning and explore supplemental solutions to address delay and interruption risks.

POSITION YOUR CONSTRUCTION BUSINESS FOR GROWTH

With so many challenges, it can be tempting just to tread water and wait for better times ahead. But business leaders who take active steps toward resilience will protect — and even grow — their businesses. The most important steps you can take include:

1. Review risk management process. Conduct an enterprise-wide risk assessment to identify gaps in coverage and claims protocols. Develop response plans for different types of incidents, and practice plan implementation. Ensure proper procedures are in place before a loss occurs, which can minimize losses and expenses at a critical juncture.

2. Plan early for insurance renewals. Communicate regularly with your expert advisor or broker, not just at renewal time, but all year long. Update them on major business decisions so they can be aware of changing exposures, coverage limits and alternative risk transfer options. Finally, report all claims as soon as possible so they can help mitigate potential losses.

By taking a proactive, strategic approach to risk, workforce investment and financial planning, construction firms can navigate uncertainty while positioning themselves to capture new opportunities in a rapidly evolving industry.

Andrew Rutherford, CLCS, is Senior Vice President of Commercial Lines at insurance brokerage HUB International Northwest.