Geopolitical Risk Overtakes Supply Chains as Construction's Top Concern, Arch Survey Finds

Why Geopolitics Now Leads Construction's Risk List

Geopolitical instability has replaced supply chain disruption as the leading risk facing the global construction sector, according to Arch Insurance International's inaugural Construction Risk Report, published last week. The report, based on a survey of 44 organisations in the global construction sector carried out between April and May 2026, found that 59% of respondents placed geopolitical instability among their top three concerns, ahead of supply chain disruption (52%) and weather and climate-related events (36%).

The survey also found that 85% of respondents reported at least a moderate rise in overall risk exposure over the past 12 months, with none reporting a decrease. Within the geopolitical category, conflict or war and government policy changes were each flagged as material threats by 53% of respondents, followed by trade restrictions (47%) and political unrest (44%). Almost a third (31%) said clients had reconsidered or relocated projects because of geopolitical concerns.

Material and market volatility are compounding the picture: 78% of respondents reported increased volatility in material sourcing and procurement, and 75% cited greater volatility in the markets where they operate. Weather risk remains a major exposure, with 82% identifying flooding as the peril posing the greatest risk to their projects, and 77% saying exposure to weather and climate-related events had risen over the past five years. Some 67% said deductibles or self-insured retentions had increased over the same period, and 91% agreed skilled labour shortages were creating significant operational risk.

Arch's senior construction underwriter, Stephen Convery, said the risk's “influence is being felt across the industry through inflationary pressures, procurement challenges and supply chain disruption.” The findings are consistent with separate industry reports: Aon's 2026 Global Construction Insurance and Surety Market Report flags macroeconomic uncertainty, geopolitical tensions and cyber risk, while QBE and Control Risks found escalating tariffs are affecting access to materials including steel, aluminium, timber and copper. Swiss Re Institute forecasts global non-life premium growth of just 0.6% in real terms in 2026, against a long-term average of 3.6%.

Where the Coverage Gap Opens: Relocation, Retention and Tariffs

The 31% Who Are Moving Their Work

Nearly a third of respondents said clients had reconsidered or relocated projects because of geopolitical concerns. That is a behavioural change with direct insurance consequences: relocation changes the insured location, the legal and regulatory environment, and the perils a project is exposed to. The insurance conversation, however, often only catches up at renewal. Geopolitical risk is a newer, faster-moving category than the natural catastrophes underwriters have decades of data on, so the exposure may be shifting even where policy wordings have not. Trade restrictions, flagged as material by 47%, and political unrest (44%) are particular triggers for projects that rely on imported materials or operate across multiple jurisdictions.

The Self-Insurance Signal

More striking than the relocation figure is that 54% of respondents said they were considering self-insuring a greater share of their risk. The report does not state why; the standard reading is that clients move toward self-insurance when existing products do not seem to address the specific risk that concerns them. Geopolitical instability — difficult to price precisely and, for some underwriters, still a generic extension rather than a core peril — is a plausible candidate for that gap. The commercial implication for brokers is direct: the business either stays in the risk-transfer market through a product genuinely built around geopolitical risk, or it migrates to retention.

Tariffs Have Become a Materials Problem

The 78% reporting greater volatility in material sourcing connects the geopolitical shift to hard project economics. The QBE and Control Risks analysis names steel, aluminium, timber and copper as materials whose access is being affected by tariffs and trade disputes. For underwriters, that raises the question of whether construction policies capture cost escalation and delay driven by trade policy as much as by physical perils. Trade credit and material price-related covers become more central as trade restrictions move up the risk list.

Flooding, Deductibles and a Tight Labour Market

On the climate side, the survey's 82% ranking flooding as the greatest project peril, and the 67% who have seen deductibles or self-insured retentions rise, point to a market where risk transfer is becoming more expensive precisely where exposure is growing. The 91% flagging skilled-labour shortages adds an operational layer: projects that cannot staff on schedule face delay, which makes delay-in-start-up and business interruption triggers worth re-testing. Swiss Re Institute's forecast of 0.6% real non-life premium growth in 2026 sets the competitive backdrop: flat premium growth means retaining quality construction accounts, and differentiating on a credible geopolitical product, matters more than chasing volume.

Rechecking Political Violence, Trade Credit and Delay Cover With Construction Clients

For brokers placing construction risk, the Arch survey shifts the conversation from what might happen to what clients are already doing. The following checks are grounded in the report's findings.

• Screen live projects for political exposure before renewal. Conflict or war and government policy changes were each named as material threats by 53% of respondents, and political unrest by 44%. Identify which jurisdictions and projects are exposed and test whether existing political violence and cancellation wordings actually respond.
• Ask directly about relocation or re-siting. With 31% of respondents saying clients had reconsidered or relocated projects, a move changes the insured location, applicable law and peril profile — a gap that only surfaces if the broker raises it.
• Quantify material sourcing volatility. 78% reported greater procurement volatility, and the QBE/Control Risks report ties tariffs to steel, aluminium, timber and copper prices. Review trade credit and material cost escalation cover for clients reliant on imported inputs.
• Probe retention appetite before clients decide on their own. 54% are considering self-insuring more, and 67% have already seen deductibles or self-insured retentions rise. Present a geopolitical cover built around the risk — not a generic extension — while the retention decision is still open.
• Re-test flood limits and deductibles. 82% rank flooding as the greatest project peril and 77% report increased climate exposure over five years, so rising retentions (67%) may be out of step with current exposure.
• Check delay and interruption triggers against labour constraints. 91% say skilled-labour shortages create significant operational risk; verify that delay-in-start-up cover responds when scheduling is disrupted by workforce gaps.
• Set expectations against the broader market. Swiss Re Institute projects 0.6% real non-life premium growth in 2026 versus a 3.6% long-term average — competitive pricing raises the value of keeping well-priced construction accounts on the books.