1. Supply chain challenges – The construction industry has felt the widespread impact of supply chain problems, such as material shortages and deliverability disruption, in part, due to recent geopolitical tensions, global trade conflicts, and uncertainty related to potential tariffs. Steel and lumber prices are expected to experience increased volatility in 2025 due to these ongoing global trade conflicts. In addition, shortages are being seen for electrical products, particularly transformers and switchgears, caused by record demand from the hyperscale and AI data center boom.
2. High material cost – Overall, prices of construction materials have seen modest increases in 2025. Construction material prices are 2.1%-2.5% higher year over year as of June 2025.² However, prices of building materials are still far above pre-pandemic levels, and the impact of those elevated prices can be seen in unexpected places. Some materials, including lumber, ready-mix concrete, steel products, and gypsum for drywall remain far above pre-pandemic levels. 
3. Labor shortage – Labor availability remains a major challenge for contractors across the country. The US construction industry is grappling with a significant labor shortage, with an estimated 439,000 new workers needed in 2025 to meet growing project demands, according to Associated Builders and Contractors (ABC).³ Regionally, the labor market is often even worse due to post-COVID remote work and migration away from major metros to more minor metropolitan areas, mostly with less than 50,000 people. These workforce challenges have far-reaching consequences on project timelines, costs, and opportunities for contractors. 
4. Project timelines – The effects of supply chain issues, material availability, and labor shortages all impact project timelines. Today, projects commonly start late and run long, creating contract fulfillment, risk management, and insurance challenges. Timeline issues can also impact loans and liquidity.
5. Economic concerns – As interest rates remain high, it limits access to affordable financing and reduces investment in large-scale projects. Increased financial volatility can lead to an increased risk of subcontractor defaults and cancellations. What’s more, the rising cost of wages, medical care, litigation, and materials have all driven up the cost of construction insurance and surety claims.
6. Emerging technologies – On a positive note, emerging technologies such as artificial intelligence, the Internet of Things, drones, 3-D printers, smart sensors, and wearables have quickly changed the way construction is done. These tools are allowing the management of sites with real-time precision and ability to source projects more strategically. Contractors that embrace technology are finding ways to better their efficiency, improve employee safety, and reduce costs.
7. Infrastructure spending – Over the past few years, the US has experienced a significant increase in federal infrastructure funding, with allocations exceeding $1 trillion from the Infrastructure Investment and Jobs Act (IIJA) and Inflation Reduction Act (IRA), driving progress on numerous transportation, water, energy, and broadband initiatives.⁴ Government-backed infrastructure spending, the growing popularity of public-private partnerships for public projects, and the construction of big data centers to handle data mining and AI projects are injecting much-needed investments into the industry. Although there is some anxiety around the federal direction going forward, these massive projects are still happening despite the uncertainty. 

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Munich Re Specialty offers wide-ranging primary and excess casualty insurance solutions, as well as inland marine and surety offerings, to the construction industry through our select brokers. Our broad risk appetite, experienced individual risk underwriting teams, and proven service responsiveness are backed by coverage through our A+ rated carriers. Get timely, trusted, and highly-tailored coverage to meet the most complex needs.