The Billion-Dollar Build: Insuring the Megaproject Era

When Cement Meets Chaos: Construction Risk at Scale

Nearly 90% of U.S. megaprojects exceed budgets or timelines. That’s not just inefficiency; it’s embedded risk. Large capital projects regularly suffer from delays and cost overruns due to cascading factors like labor shortages, regulatory uncertainty, and commodity pricing volatility. From 2018 to 2023, steel prices alone have swung over 70%, putting severe stress on planned budgets.

Most of these projects rely on a maze of anywhere between 100 and up to 300 subcontractors. One missed deadline or safety incident can ripple through a billion-dollar schedule. We’ve observed the fragility of these arrangements during COVID-19 and its aftermath, where just-in-time delivery models clashed with real-world material shortages.

We’re seeing rising demand for:

• Builder’s risk policies with broader delay and soft cost extensions
• Subcontractor Default Insurance (SDI) as a more agile alternative to bonds
• Wrap-Ups (OCIP/CCIP) to unify fragmented liability coverage

In this environment, brokers are now risk architects as much as coverage experts, helping clients model interdependencies and simulate potential failure points before the first shovel hits the ground. Project-specific risk modeling has become not just helpful, but essential to secure financing, permitting, and stakeholder buy-in.

The ESG Squeeze: Environmental and Political Risk Collide

Since 2018, more than $150 billion in megaprojects have been delayed or canceled due to environmental litigation, public opposition, or shifting ESG standards. From endangered species to Scope 3 emissions disclosures, today’s project sponsors are as likely to face lawsuits as labor shortages.

The ESG lens is no longer a secondary consideration, it is a foundational gatekeeper to megaproject execution. Environmental exposures go far beyond spills or emissions. They include:

• Reputational risk from climate advocacy backlash
• Carbon intensity risk tied to financing access and green bond eligibility
• Permitting risk where local pushback delays key approvals, sometimes by years

The insurance industry’s response is adapting. Products like Environmental Liability, Climate Resilience Policies, ESG-aligned underwriting frameworks, and even parametric coverage tied to regulatory delay thresholds are becoming mainstream. However, these products are only as effective as the data that feeds them. Sophisticated clients are beginning to integrate real-time environmental risk dashboards into their project planning and risk transfer models.

Hard Hats, Soft Targets: Cyber and Infrastructure Intersections

Modern megaprojects are not just steel and stone, they’re smart. From IoT-enabled HVAC systems to BIM-integrated workflows to SCADA-controlled energy grids, digital infrastructure is now as foundational as cement.

But with digitization comes cyber exposure. According to the Department of Homeland Security, critical infrastructure construction is now among the top ten sectors targeted for ransomware attacks. Construction firms saw a 150% rise in these attacks between 2020–2023. Megaprojects using integrated tech stacks, especially those with design-build-operate models, are especially vulnerable.

Essential lines include:

• Cyber Liability (including Contingent Business Interruption)
• Technology E&O for design and sensor system failures
• Project-specific cyber assessments baked into risk planning and policy wordings

Leading clients are also exploring cyber wrap policies for entire project ecosystems, ensuring that third-party vendor compromises don’t cascade into uninsured losses.

People Power: Labor, Safety and Workforce Risk

The U.S. construction industry needs over 500,000 workers annually to meet megaproject demand. With that scale comes safety risk, jurisdictional complexity, and rising union activism. Occupational fatalities in construction remain among the highest of any industry.

Furthermore, multistate and multinational labor pools increase exposure to compliance risk under state and federal law, including wage-and-hour regulation, occupational safety standards, and immigration audits.

Smart risk strategies include:

• Workers’ Compensation with high-limit extensions and location-specific endorsements
• Employment Practices Liability (EPL) in cross-state hiring contexts
• On-site health & safety embedded coverage, audit clauses, and telemedicine partnerships

Human capital is becoming a first-order risk class. As workforce-related incidents rise in frequency and severity, we’re seeing increased underwriting scrutiny, more claims documentation requirements, and greater demand for safety technology like AI-driven hazard detection.

Contracts, Claims & Complex Coverage

From multi-party JVs to design-build-transfer models, megaprojects often resemble legal mazes. This complicates everything from claims trigger definitions to indemnity allocation. The bigger the project, the more likely disputes will arise around risk ownership.

Some risks are hard to quantify until the event occurs, such as:

• Which vendor’s delay triggered the DSU clause?
• Does a cyber incident qualify as a force majeure under the wrap?
• Is flood loss under Builder’s Risk or Environmental?

EPIC is helping clients navigate with:

• Wrap-Ups and OCIPs to centralize liability in complex ownership structures
• Delay in Start-Up (DSU) tied to key milestone slippage, embedded in builder’s risk extensions
• Supply Chain Interruption and Political Risk Insurance for overseas component dependencies

Contractual clarity upfront is the best defense. The best insurance programs are designed not just to transfer risk, but to make it legible and enforceable across dozens of stakeholders.

Where It’s All Going: Future of Risk, 2025–2035

The next wave of megaprojects is taking shape right now: green hydrogen hubs in the Gulf Coast, semiconductor fabrication plants in Ohio and Arizona, offshore wind in the Atlantic corridor, smart highway systems in the West. Capital deployment over the next ten years will rival post-WWII infrastructure investment.

What’s new is the speed and scale, and the fusion of operational, reputational, and cyber risk in a single footprint.

Insurers and brokers are adapting through:

• Captive strategies that allow for control and customization
• Parametric solutions tied to weather delays or regulatory actions
• Digital twin modeling that simulates cascading failure scenarios
• Embedded risk advisors who collaborate with general contractors and legal teams at RFP stage