Architects, engineers, and construction firms across the United States are bracing for another year of tightening insurance conditions, after a new industry survey found that nearly three-quarters of leading professional liability insurers plan to raise rates in 2026 — with no insurer at all intending to lower them.
The findings come from specialty insurance broker Ames & Gough’s annual architects and engineers (A/E) professional liability market survey, which polled 15 major insurers collectively representing a significant share of the U.S. marketplace.
The report, titled PLI Market 2026: Growth Continues as Risk and Cost Pressures Intensify for A/E Firms, paints a sober picture of a sector caught between surging claim costs, macroeconomic turbulence, an increasingly litigious environment, and the uncharted risks brought by artificial intelligence.
The Rate Picture: Modest, But Unanimous in One Direction
The survey’s headline finding is stark in its consistency: 73% of insurers plan to implement rate increases in 2026, with the remaining 27% holding rates flat.
Not a single insurer surveyed indicated plans for reductions — a unanimous signal that the market has hardened and is unlikely to soften soon.
Most increases are expected to fall within the single-digit range, with 82% of insurers targeting rises of up to 5% and the remainder planning hikes of between 6% and 10%.
While these figures are relatively modest compared to the double-digit jumps seen in commercial auto insurance, they represent a sustained squeeze on firms that have already absorbed years of rising premiums.
This places the A/E professional liability market in a peculiar middle ground — hotter than commercial property and workers’ compensation, where pricing has remained more stable, but cooler than lines like excess casualty, which have experienced more dramatic swings.
A Claims Crisis That Shows No Sign of Slowing
Underlying the rate pressure is a deteriorating claims environment that experts say has been years in the making.
The proportion of insurers reporting higher claim severity rose to 60% in 2025, up from 53% the prior year and just 41% in 2023.
More telling still, none of the 15 insurers surveyed reported lower claim severity — a first in the survey’s history, and a data point that underscores just how pervasive the problem has become.
Nearly all respondents — 93% — flagged rising defence costs as a material driver of this trend.
The culprits are familiar to anyone who has tracked the so-called social inflation phenomenon: more aggressive plaintiff attorneys, a greater reliance on expert witnesses, longer case resolution timelines, and higher costs from panel counsel and specialist vendors.
The result is that even claims that would once have been settled relatively quickly and cheaply are now drawn-out, expensive affairs.
The prevalence of multimillion-dollar payouts is also climbing. Some 82% of insurers said they paid claims exceeding $1 million in 2025, including 13% that dealt with claims in the $10 million to $19.9 million range — figures that illustrate the growing tail risk facing underwriters and the firms they cover.
Structural engineering emerged as the highest-severity discipline in the survey, flagged by 80% of respondents, followed by civil engineering at 73% and architecture at 60%.
Litigation Funding Adds Fresh Complexity
One factor amplifying the litigation landscape — and receiving growing attention in insurance circles — is the rapid expansion of third-party litigation funding.
Industry data cited by the U.S. Chamber of Commerce puts assets under management in this sector at $16.1 billion as of 2024, a figure that has grown sharply over recent years.
The implications for construction insurance are significant. When external financiers with a stake in the outcome back plaintiffs in construction disputes, the incentive structure shifts. Settlements that might once have been reached early are contested more aggressively, claims are litigated to a higher standard, and the overall cost of resolution rises.
Ames & Gough’s survey found 93% of insurers now consider social inflation and litigation funding to be meaningful disruptors of the A/E liability market — the highest-ranked threat of any category.
The AI Wildcard
Perhaps the most forward-looking dimension of the survey is its treatment of artificial intelligence.
With design firms increasingly incorporating AI tools into everything from structural modelling to project management, insurers are watching closely — and are far from reassured.
Some 80% of surveyed insurers identified AI adoption by design firms as a potential market disruptor.
The concern is not merely that AI might produce errors, but that questions of accountability, transparency, and professional liability have not yet been settled in a context where machine-generated outputs feed into safety-critical design decisions.
Jared Maxwell, vice president and partner at Ames & Gough and the survey’s author, noted that AI use “must be supported by disciplined controls, transparency and accountability.” The warning carries practical weight: firms that cannot demonstrate robust governance around their AI tools may find themselves subject to greater underwriting scrutiny, higher premiums, or reduced coverage availability as the market recalibrates.
Contracts Becoming a Flashpoint
Beyond claims and AI, the survey highlights growing friction in the contractual relationships between project owners and design firms.
Fully 80% of insurers said they now consider contractual risk transfer attempts by project owners to be a factor affecting design firm insurability and professional liability rates.
The concern centres on the use of onerous contract clauses that impose broader indemnity obligations on design firms, include mandatory arbitration requirements, or attempt to expand the standard of care beyond what is typically insurable.
When project owners push excessive risk onto design firms through contract language, those firms may find that their professional liability policies do not cover the full extent of their assumed obligations — leaving them exposed in the event of a dispute.
Maxwell urged design firms to scrutinise contractual agreements with particular care.
“For design firms, effective risk management absolutely calls for a thorough review of contractual agreements and exercising care and diligence in the selection of projects,” he said, adding that firms should also consider whether their internal risk training is keeping pace with the evolving landscape.
What This Means for the Broader Industry
The implications of these findings extend well beyond the insurance market itself. Rising professional liability premiums feed directly into project costs, and in a construction sector already grappling with trade uncertainties, labour shortages, and the residual effects of elevated interest rates on development activity, any additional cost pressure matters.
For smaller and mid-sized architecture and engineering firms, the burden may be disproportionate.
Larger firms can often absorb rate increases more readily, build layers of coverage across multiple insurers, and invest in the risk management infrastructure that underwriters increasingly reward.
Smaller firms may face tighter margins or difficult choices about which project types and clients they can afford to take on.
The survey’s findings on project selection are relevant here. With 56% of insurers targeting higher rates specifically at firms with exposure to condominiums, residential construction, and infrastructure — historically the sectors with the most contentious liability claims — some firms may face pressure to rebalance their portfolios away from these areas.
Whether that is feasible in a market where infrastructure investment remains a priority is another question entirely.
On the positive side, coverage availability has not meaningfully contracted: most insurers indicated no change in the limits they are willing to offer, with 80% able to provide limits exceeding $5 million and 40% able to go up to $10 million.
The market is more expensive, but it has not yet become restrictive in the way that some casualty lines have.
Navigating a Difficult Market
For firms seeking to manage their exposure in this environment, Ames & Gough’s guidance points in several practical directions.
Engaging with project owners early to ensure that requested liability limits are proportionate to actual project risk can reduce unnecessary exposure.
Where higher limits are unavoidable, exploring layered structures across multiple insurers rather than concentrating risk in a single policy may offer both coverage and cost benefits.
On the internal side, firms that can demonstrate strong claims histories, disciplined contract review processes, and robust risk management training are likely to receive more favourable treatment from underwriters.
In a market where pricing is increasingly tailored to individual risk profiles, the gap between well-managed and poorly-managed firms in terms of insurance costs could widen further.
The Ames & Gough survey ultimately reflects a market at an inflection point — one where the pressures of the past several years are crystallising into sustained structural cost increases, while new risks on the horizon suggest the adjustment process is far from over.
Also Read
State of US Construction 2026: Market Trends, Challenges, and Future Outlook
US Building Codes and Regulations Every Contractor Should Know
