An evolving property market

Survey the construction industry in 2025 and it is clear that the market for large, complex, high-value megaprojects is heating up.

Increasingly costly data centers and other megaprojects are springing up around the U.S., many of them intended to help power the technologies that will transform society in the years to come.

But not every kind of heat is a net positive. There is general agreement in the scientific and meteorological communities that a warming climate is likely to spawn more powerful and destructive hurricanes and typhoons in the years ahead. A warming climate is also driving increasingly severe convective storms in the continental U.S. Powered by warm, moist air rising from the ground (convection), strong, “supercells” can deliver drenching thunderstorms with intense lightning and are too often accompanied by tornadoes, hailstorms and extreme straight-line winds. Destructive pluvial flooding, i.e., heavy rainfall overwhelming the capacity of natural and engineered drainage systems, may also result from severe convective storms.

At the other end of the continuum of climate change impacts, wildfires due to extended droughts in affected regions have shown to be some of the costliest, and potentially deadliest, natural catastrophes on record.

With these shifts in mind, the risks linked to climate change facing builders and their insurance providers will continue to impact how structures in affected areas are erected and insured in years ahead.

The costs of climate change

Half of Zurich’s top 10 construction property losses over the past two years were due to severe convective storms, including a hail loss costing $18-$20 million early in 2025. By one estimate, the first half of 2025 generated in aggregate the insurance industry’s most damaging extreme weather on record in terms of cost, even after accounting for inflation – between $93-$126 billion in damages. This estimate dwarfs the previous most costly first six months on record, of $57 billion (inflation-adjusted), set in 2023.1

By one estimate, the first half of 2025 generated in aggregate the insurance industry’s most damaging extreme weather on record in terms of cost.

In 1980, just three events caused more than $1 billion in inflation-adjusted damage. By the close of the 1980s, the decade had experienced 33 such disasters, according to NOAA data. By comparison, 2024 alone has generated 27 inflation-adjusted billion-dollar events. And halfway through the 2020s, we have witnessed 115 disasters of $1 billion or greater.2

Changes in land-use and expanding urbanization have also contributed to what some researchers have referred to as the “bull’s-eye effect,” placing higher-density residential, commercial and industrial centers in the paths of severe weather events that might have missed them in the past.3 In 2017, 3.3% of the entire land area of the U.S. was urbanized, compared to 2.2% in 1982, and just 0.8% in 1949. The U.S. urban/suburban population density has also increased, from 167 million in 1980 to 249 million in 2010. The bullseye effect

is particularly relevant to the toll of tornado strikes, as twisters tear through more heavily populated and commercially developed areas. And replacing open spaces with roads, parking lots and industrial developments has also worsened floods in areas where pluvial flooding following heavy rainfalls was relatively rare.4

The trend of changing weather patterns will continue to challenge limits and pricing, making it important for construction firms to draw upon the risk management advice and recommendations of Zurich Resilience Solutions (ZRS). ZRS professionals are well-versed in the risks changing weather patterns may present to projects at all stages of construction as well as potential mitigations which can help to reduce such risks.

Megaprojects driving higher values

As the demand for megaprojects, especially large data centers, heats up, the values at risk are rising to new heights as contractors break ground on a growing number of multi-billion-dollar facilities. Underwriters are finding it more common to be asked to review risks in the $5-$10 billion range, with one recent data center under construction valued in excess of $23 billion, and another in the $26 billion range.

Given the size and scope of today’s megaprojects, financial institutions are increasing lending requirements. From an insurance standpoint, accommodating a project’s lending requirements with necessary capacity is not new. But lenders lack full awareness of the capacity available in the market, and the scales and values of many of these megaprojects are straining the industry’s ability to provide the capacity needed. In some cases, lenders are asking for accommodations simply unavailable in the market. Reinsurers are facing the same capacity challenges. The typically high values of data centers also hold the potential to increase volatility for insurers in the event of catastrophic losses. As the discussion turns toward more $10-$20 billion projects, available capacity will continue to be an issue.

Powering change

Data center megaprojects face one other availability issue – the electricity to feed massive numbers of power-hungry servers linked together to drive AI and other functions. The existing grid will be insufficient for the needs of an expanding number of facilities being switched on by tech and retail giants. Enter the era of the Small Modular Reactor (SMR), compact nuclear reactors built with proven technologies and designed to power a megaproject at peak efficiency 24/7 off the grid.

SMRs are factory-built nuclear power plants generating enough heat to produce around 300 megawatts or less, and which are designed to be mass-produced and shipped to sites for faster, less costly installation than the much larger, historic installations operated by utility companies.5

While the surge in data center construction continues to capture attention in the media, they are far from being the only megaprojects underway in the U.S. Major expansions and renovations are underway at Chicago’s O’Hare Field and New York’s JFK International. New York City’s massive Hudson Tunnel project will deliver future climate resilience to a major railway artery, while generating an estimated $19 billion in economic activity during and after construction. Scheduled to open in early 2026, the stunning, cable-stayed Gordie Howe International Bridge will link Detroit and Windsor. And new high-speed rail projects in the western U.S. will help to innovate rail travel for the 21st century.6

The existing grid will be insufficient for the needs of an expanding number of facilities being switched on by tech and retail giants.

Prescription for growth

Another segment primed for change and domestic growth is the pharmaceutical industry. Product innovation is driving growth among major firms, prompting plant retooling, major overhauls and new construction to bring the manufacture of next-generation drugs back to the U.S. As the drive to innovate continues to heat up, watch for values and the need for capacity to increase, placing even greater strain on the availability of capacity in U.S. and global markets.7

Keeping hot work cool

Heat of another variety remains a growing concern in construction and facility maintenance. Hot work accidents have more than once resulted in high-severity claims. A recent data center fire generated a $50-$60 million loss when an employee assigned to fire watch failed to detect ignition in a nearby HVAC unit not the subject of the hot work procedure.

Welding, brazing, soldering, grinding and cutting, blow-lamps, torches, open flames and any other tasks that need to be performed on a jobsite need to be carefully planned, properly permitted, and closely monitored during and after the work is performed. Supervisors aware of the risks of hot work will often assign an employee to perform a fire watch for a specified period to ensure that no fire occurs after the job is completed.8

While data is inconclusive whether hot work losses are occurring more frequently, the escalating values of modern construction projects, especially megaprojects such as data centers, means severity could increase.

Conclusion

The property market is evolving, with the scope and insured values of projects demanding more products and capacity from traditional property insurance markets. Zurich is well positioned to respond to the needs of a changing property market, providing the technical leadership and resources aligned with the needs of all commercial construction, ranging from traditional construction to megaprojects, while deepening our relationships with U.S.-based contractors and project owners.

References:

  1. Price, James. “Extreme weather caused more than $100 billion in damage by June – smashing US records.” Live Science. 10 October 2025.
  2. Ibid.
  3. Ashley, Walker S., Strader, Stephen, Rosencrants, Troy, Krmenec, Andrew J. “Spatiotemporal Changes in Tornado Hazard Exposure: The Case of the Expanding Bull’s-Eye Effect in Chicago, Illinois.” American Meteorological Society. 1 April 2014.
  4. Price, James. “Extreme weather caused more than $100 billion in damage by June – smashing US records.” Live Science. 10 October 2025.
  5. Williams, Kevin. “Nuclear in my backyard? More of America, and the market, seems OK with it.” CNBC. 5 October 2025.
  6. Paul, James. “Top Impressive Mega Projects in United States (2025).” Infra Info Hub. 12 October 2025.
  7. Banker, Steve. “Pharma Companies Pour Billions Into US Manufacturing To Avoid Tariffs.” Fortune. 23 July 2025.
  8. Satti, Intisar. “What’s Hot Work? Definition, Hazards, And Safety Precautions.” Occupational Health and Safety Blog. 8 July 2024.

The information in this publication was compiled from sources believed to be reliable for informational purposes only. All sample policies and procedures herein should serve as a guideline, which you can use to create your own policies and procedures. We trust that you will customize these samples to reflect your own operations and believe that these samples may serve as a helpful platform for this endeavor. Any and all information contained herein is not intended to constitute advice (particularly not legal advice). Accordingly, persons requiring advice should consult independent advisors when developing programs and policies. We do not guarantee the accuracy of this information or any results and further assume no liability in connection with this publication and sample policies and procedures, including any information, methods or safety suggestions contained herein. We undertake no obligation to publicly update or revise any of this information, whether to reflect new information, future developments, events or circumstances or otherwise. Moreover, Zurich reminds you that this cannot be assumed to contain every acceptable safety and compliance procedure or that additional procedures might not be appropriate under the circumstances. The subject matter of this publication is not tied to any specific insurance product nor will adopting these policies and procedures ensure coverage under any insurance policy. Insurance coverages underwritten by individual member companies of Zurich in North America, including Zurich American Insurance Company. Certain coverages not available in all states. Some coverages may be written on a nonadmitted basis through licensed surplus lines brokers. Risk engineering services are provided by The Zurich Services Corporation.