Impact of Construction Type on Cost
of Construction and Building Insurance Cost

The reader is referred to the Study, Initial Cost of Construction, Multi-Residential Structures, October 2017 original report for a complete discussion on study design and methodology. View the Study.

Prepared by: Walter G. M. Schneider III, Ph.D., P.E., MCP, CBO, CFO
Dr. Schneider is registered as a professional engineer in six states, and a International Code Council (ICC) Master Code Professional, and has been actively designing buildings for more than twenty-five years, working on projects that include commercial, single and multi-family residential, retail, and sports based projects. Dr. Schneider currently holds a certification as a registered Building Code Official in the Commonwealth of Pennsylvania and has been involved in the fire service for more than 30 years, both as an active firefighter and fire chief, and as a State Fire Instructor in the Commonwealth of Pennsylvania.

It has been determined that the insurance industry recognizes that there is a relative risk differential between wood construction materials and the other materials used in this study. The differential risk is reflected in the builder risk insurance costs. In addition to the initial cost of construction, lifecycle cost is effected by the building construction type. While this is very difficult to quantify for maintenance costs overall and material performance level over time, it is being acknowledged by the insurance industry as well with property insurance. Keeping in mind that the property insurance cost is greatly affected by many external factors, and is highly dependent on the building occupancy type, there is a recognized difference in the property insurance based on the construction materials and thus recognized construction type.

Patrick Riley, CPCU, ARM, CRIS - Vice President, Property & Casualty, USI Insurance Services LLC was added to the team to provide insurance cost factors for builders risk/GC liability and property insurance. "Like the property insurance market overall, the builder’s risk market has hardened significantly over the past several years. The hardening property insurance market has been driven by an increase in the frequency and severity of natural disasters along with the reduction in capacity and increasing prices in the reinsurance market. The hardening of the builders risk market has been driven primarily by an increased frequency of attritional losses and many large fires on wood-frame residential projects. Large wood frame projects have experienced the most severe impact over recent months, with few changes expected in the near future. The cost study has been updated to reflect these rate changes across building materials.

Not contemplated in the cost study is the long-term costs associated with certain building materials, including wood frame. These costs are incurred annually by building owners and will exist as long as the building is owned. In the current market, the cost to insure multi-residential structures from a property perspective can be up to 4x higher for wood frame vs. masonry non-combustible."

This reinforces the benefits of the resilient, non-combustible, fire resistive construction methods.

Addendum Cities

The following addendum cities present a table showing builder’s risk insurance cost, the initial cost of construction, the building property insurance cost, and the cost of insuring the building for ten (10) years. The costs are compared using the conventional wood framed system as the baseline in the “relative cost” evaluation.

District of Columbia
> Addendum: Washington, DC – August 2020 with June 2022 Insurance Update

Georgia
> Addendum: Atlanta, GA – May 2021 with September 2022 Insurance Update

North Carolina
> Addendum: Charlotte, NC – May 2021 with September 2022 Insurance Update

Pennsylvania
> Addendum: Lehigh Valley, PA - October 2017 with June 2022 Insurance Update
> Addendum: Philadelphia, PA - August 2020 with June 2022 Insurance Update
> Addendum: Pittsburgh, PA - June 2021 with June 2022 Insurance Update
> Addendum: Harrisburg, PA - August 2020 with June 2022 Insurance Update

Dallas, Texas
> Addendum: Dallas, TX – May 2021 with September 2022 Insurance Update