Emerging construction methods such as mass timber, modular manufacturing and robotics are gaining traction in the building industry thanks to their cost and labour efficiencies.
But for insurers and developers alike, these techniques are presenting significant underwriting challenges, leading to fewer carrier options, higher premiums, and capacity constraints for developers.
Jencap Group’s SVP of Construction, Kris Bauer (pictured), estimates that projects using non-traditional construction methods may face 20-40% fewer carrier options compared to conventional builds.
“You are looking at a more limited marketplace than a traditional concrete-steel structure or even a traditional wood-frame,” he told Insurance Business.
According to Bauer, the construction industry is in transition as developers are embracing modular building methods. At the same time, mass timber alternatives such as cross-laminated timber (CLT) and glue-laminated timber are helping reduce reliance on steel, concrete and labour-intensive wood-frame systems.
The shift is driven by several factors, including supply-chain disruptions, tariffs, and the rising cost of labor in certain markets.
“With modular, for example, you can build the units in a cheaper location, transport them to a site like downtown San Francisco, and install them quickly without having to house a large labour force on site,” Bauer pointed out. “That creates major cost and schedule efficiencies.”
But the underwriting world is still catching up. Insurers point to limited historical data on how these newer materials hold up in the long term, driving caution in risk selection. For mass timber in particular, Aon research noted that “limited historical data on mass timber makes it challenging for insurers to develop comprehensive underwriting practices.”
A Gen Re study also found that timber-based construction could command a premium factor of 2.4 times that of masonry equivalents, due to the lack of loss-data and higher uncertainty around water and fire exposure.
“That’s why you typically lose 20–40% of the viable insurance market the moment you choose an emerging method like CLT or modular. You can still get it placed, but you have fewer carriers willing to quote… and when you have fewer options, price goes up,” said Bauer. “So developers have to weigh the construction savings against the increased cost of insurance.”
Capacity constraints are another factor. Bauer warned that for residential projects, especially in challenging areas such as coastal Florida or Hawaii, the pool of insurers willing to engage with non-traditional methods shrinks further.
Looking further out, Bauer delves into what he calls the “future, future”: AI‐driven tools, robotics and 3D-printed homes. Robotics, as an example, is starting to show up in modular factory projects, but in the pilot or beta stages, according to Bauer. "The main barrier right now is cost," he said. "The technology still needs to become cheaper before traditional contractors can adopt it at scale. Once it does, the insurance industry will have to follow, just like it did with early space and satellite risks.
While still in early adoption, these technologies raise a new set of risk questions: cyber vulnerabilities, product durability, regulatory exposures and long-term performance.
“The E&S market will likely lead the way, because it’s more comfortable with emerging risk. But the same rule applies: once there’s data, once underwriters see a few of these projects perform successfully, more carriers will enter the space,” said Bauer.
Bauer shared some key steps stand out in the market:
While emerging construction methods like mass timber, modular manufacturing and robotics hold major promise for cost-efficiency, sustainability and speed, the insurance sector is still digesting the risk implications.
“Some carriers don’t want to deal with that complexity and stick to traditional construction. Others will ‘dabble’ and quote selectively if you give them everything they need,” noted Bauer. “And then there’s a very small group that actively likes these risks. But those are still the exception, not the rule.”
