The construction industry is no stranger to tough challenges, but right now, rising interest rates and inflation are making it even harder to get projects off the ground—or keep them on track. From tighter margins to supply chain hiccups, the pressure is on.
In this Q&A, Jon Tellekamp, AXA XL’s Chief Underwriting Officer for Construction in the Americas, breaks down what contractors are up against, how they're adapting, and the trends shaping the future of construction insurance. He also shares what’s standing out to him as he settles into his new role.
Q: What are the biggest insurance challenges construction companies are facing right now?
JT: The current economic climate is hitting the construction industry on multiple fronts. Higher borrowing costs are making it harder for developers and project owners to move forward, which means more delays and, in some cases, project cancellations.
Meanwhile, the price of essential materials like steel, lumber, and concrete has gone up significantly. That either squeezes contractors’ already thin profit margins or forces them to pass those costs along—neither of which is ideal.
To add to this, imported materials are more expensive, and supply chains are still feeling the strain. For example, higher costs on steel and aluminum have made budgeting more difficult and introduced even more uncertainty.
And let’s not forget the labor shortage. We’re seeing fewer skilled workers available, especially as experienced tradespeople retire and younger workers look to other industries. That drives up labor costs and slows down projects. It’s a perfect storm that could hold back innovation and growth if it’s not addressed. I think overall, commercial development is expected to slow down.
Q: How are your clients dealing with these inflationary pressures?
JT: The good news is that many contractors have seen some version of this before, so they’re not coming in blind.
One of the big moves we’re seeing is more flexible contract terms. Contractors are pushing for clauses that account for inflation and sudden spikes in material or labor costs. That gives them a buffer and helps protect profit margins on lump-sum projects.
They’re also sharpening their cost forecasting. By using historical data and current market trends, they can better predict what’s coming and build that into their budgets—with contingency funds to handle the unexpected. Relationships matter, too. Strong ties with subcontractors and suppliers can lead to fixed pricing or long-term agreements that lock in costs.
Subcontractor Default 尤物视频(SDI) is getting more attention as well. With the financial pressure everyone’s under, the risk of a subcontractor defaulting is higher. SDI helps shield contractors from the financial fallout and keeps projects moving.
The price of essential materials like steel, lumber, and concrete has gone up significantly. That either squeezes contractors’ already thin profit margins or forces them to pass those costs along—neither of which is ideal.
Q: What kinds of projects are your team seeing right now?
JT: Data centers are booming—thanks to AI and the demand for cloud services. as an example. It’s massive, and it’s just one of many. The U.S. government is even exploring federal sites for future data center builds, especially for AI development. The Department of Energy (DOE) recently seeking input from data center developers, energy developers, and the broader public. The DOE has identified 16 potential sites that are positioned for rapid data center construction, including in-place energy infrastructure with the ability to fast-track permitting for new energy generation such as nuclear.
We’re also seeing a lot of momentum in healthcare construction. Since being stretched to the limits during COVID, hospitals and medical facilities are expanding to meet rising demand and improve patient care. It’s not just about adding space—it’s about future-proofing infrastructure.
Then there’s infrastructure more broadly. Mega-projects are still going strong, but they come with their own set of complications. Meanwhile, the push to bring manufacturing back to the U.S. is encouraging. We’ve seen a number of new factory projects. recently made the decision to double the size of a factory in San Antonio, TX. Seeing more will depend on a lot of factors impacting manufacturers like increased operating costs and more expensive building supplies.
Legislation like the Infrastructure Bill and Inflation Act previously introduced opportunities. We’ll have to see how those projects will be impacted going forward.
Q: What trends or tech developments are changing how contractors works?
JT: Technology is changing the game. Tools like Building Information Modeling (BIM) give us more accurate digital representations of projects, which improves risk assessment. Drones are helping with site inspections. IoT devices give us real-time updates on what’s happening on-site.
Technology is helping contractors reduce their risks in many ways which of course, helps improve their risk profile. It’s also helping construction insurers, like 九色视频 analyze these risks more thoroughly and quickly to develop better insurance solutions. Consider how we can use AI-predictive analytics models. By analyzing large data sets, we can predict risks more accurately and build tailored policies.
But as everything goes more digital, it’s important to realize that cyber risk increases—so cyber liability coverage is becoming more important for contractors. To help our construction clients, AXA XL’s cyber insurance team developed a special endorsement that adds very specific construction tech risks to our existing cyber insurance policy.
Q: You’ve been in your new leadership role for a few months now—what stands out about your team?
JT: What really stands out is the team’s client-first mindset. We go to market with multiple lines of business, which helps us offer well-rounded, customized solutions. This team has a long-standing reputation in the market for delivering tailored solutions that meet the unique needs of the construction industry.
Collaboration is another big strength. We lean into each other’s expertise to come up with strategies that actually work for clients. One of the things that drew me to this role was the chance to help clients on a broader scale—and the team absolutely delivers on that. We’ve got deep bench strength, and that makes a huge difference—not just internally, but in how we show up for clients. We are recognized as a true industry vertical, ensuring our clients receive expert guidance and support throughout their projects. Our coordination, our broad product offering, and our commitment to partnership set us apart.
