Property market and building trends amid the 2021 hurricane season

The construction and restoration industry has faced a unique set of challenges in the last year, including, but not limited to, rising material and labor costs, increased labor shortages and extended restoration periods. For those responding to storm damage, repair and restoration — these new issues certainly aren’t going anywhere anytime soon.

We are now more than one month into the 2021 hurricane season, and business leaders and insurance professionals alike have one eye on developing winds in the Atlantic and another eye on the rising costs of indemnity. This is especially true considering that weather models are forecasting another above average hurricane season through November 30. With the active storm season this could increase the demands even further. To help you navigate the storm season and stay informed, we’re keeping a close watch on several important trends.

Increased material costs

While the rising cost of lumber has been frequently cited in headlines, the cost of all related materials and supplies have increased considerably. It is important to stay on top of industry trends and be as accurate as possible in pricing as well as being realistic when reviewing construction reports and component costs as they apply to the claims environment. Different types of work common in the insurance industry are affected by the recent cost increases differently. The cost for trades that rely on contract labor and minimal materials have risen much less than trades that depend on large amounts of imported materials and market-based labor. It is critical for underwriters and claims professionals to understand how these changes impact their markets.

Cost increases are being driven by supply and demand as well as inflationary factors. Additionally, some materials are on backorder which can cause delays and increase overall building costs. There are indications that some prices will began stabilizing in the coming weeks and ultimately land at a 25-30% increase when viewed year-over-year.

There is growing concern among experts that there will be significant labor cost inflation particularly as it affects remediation and construction labor in the later parts of this year (Q3-Q2 2022) and beyond. It will no longer be sustainable to expect that skilled professional remediation workers will be willing or able to work for wages similar to the ones offered as starting wages at fast food and warehouse positions, which is a dynamic that is emerging right now.

Rising transportation costs

Just as the cost of materials and supplies are rising, so are fuel prices. That means transportation costs to get products and goods to the construction site have an increase in freight. Prices associated with shipping, logistics, rentals and other modes of transport are all on the upswing. Not only are transportation costs rising but shipping times are also increasing considerably.

Labor shortages

The amount of unfilled positions for skilled workers is having a dramatic effect on project costs and timeframes for completion of repairs and restoration. Workers have not returned to the workplace and filled open positions as quickly as some anticipated following the COVID-19 global pandemic. The primary and secondary housing markets and number of remote workers completing home remodels is at an all-time high, placing more demand on the labor market for both skilled and unskilled labor. Simply put, the demand for labor is dramatically exceeding the supply.

Extended restoration periods

As building and project costs increase, the traditional restoration period has extended due to materials being on backorder, delivery delays, or the labor shortage. For example, what would traditionally take three months to build may now take five months to complete due to extenuating factors. In many cases, business interruption or additional living coverage expenses are triggered due to these extended timeframes.

Effects of hardening market

Amid the rising material and labor costs and extended restoration periods, many lines of coverage in the insurance marketplace are hardening. This is particularly true for property coverage as business owners witness premium increases, a tightening of coverage or policy restrictions, or a combination of both.

What’s next? As leaders make plans to mitigate any negative impact, there are several areas to focus on:

Report accurate evaluations

Coming off business revenues in a year plagued by COVID-19, it would be easy to misjudge or underreport property valuations. However, this could harm businesses and have a negative impact on operating expenses. Replacement costs may far exceed the insurance payouts and sublimits. Coinsurance penalties may be greater than expected. This is an area insurance companies and underwriters will be monitoring closely to ensure they collect adequate premium in response to the exposure they are covering.

Review policy wording

Given the hardening of the property insurance market, business leaders should take time to carefully review policy wording and contract language to ensure they are obtaining the coverage intended. As policy language tightens and coverage constricts, deductibles can change, the time at which business interruption coverage starts can lengthen, and other coverage restrictions can be interjected.

Underwriting reviews

Given the recent structure collapse in Miami, underwriters should be reviewing maintenance programs associated with multi-family and condominium associations to affirm they are properly managed and maintained. Risk valuations should be completed assessing these factors as well as proper replacement cost calculations.

Establish business partnerships

Working with repair and restoration firms prior to a storm hitting and causing extensive destruction tends to produce better results than taking a chance on the open market. In the aftermath, impacted businesses are all scrambling for materials, labor and services. If a program has a nominated adjuster, have conversations and establish contingency plans before it’s too late. At Sedgwick we utilize the software-as-a-service offering T&M Pro, a premier billing and data management system for insurance restoration contracting. The T&M Pro software enhances our services by providing stronger commercial property support, estimate review processes and mitigation and reconstruction bill review. The software also speeds up payments to insurance restoration contractors and gives carriers greater visibility into claim costs associated with the loss. Through the integration of this software, both carriers and contractors will now have greater transparency of restoration costs by sharing real-time and expense invoices on commercial losses.

Hurricane season is upon us and the challenges of the pandemic are still a storm to manage, but preparation can enable businesses to weather the storms. To learn how Sedgwick can provide support where and when you need us most, visit

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