The construction and engineering (C & E) sector has had several years of constrained growth but has recently shown signs of recovery. It is premature to declare 2026 the breakout year, but a substantial change in macroeconomic and industry specific drivers suggests a favourable trajectory. This transition provides opportunities to C & E insurers and brokers but also requires discipline and a future-oriented positioning.

The slowdown in construction activities resulted from rising inflation, increasing interest rates, supply chain interruptions and fiscal constraints that limited public infrastructure investment. As we believe at Mukfin, the recovery of the C & E sector is grounded in fundamentals. Lower borrowing costs generally improve the viability of construction projects, particularly residential and commercial developments, as they are highly sensitive to financing costs and economic confidence.

There is however relief amid the macroeconomic turmoil. Interest rates are easing, and inflationary pressures have moderated, providing cost predictability to developers and contractors. Governments and development finance institutions are also focusing on infrastructure development as a catalyst for economic growth, resilience and employment, particularly in emerging markets and regions with deficient infrastructure.

The sector's recovery is not expected to be even. We have segments such as energy, transport, infrastructure, and industrial projects, these are most likely to lead the rebound, whilst commercial real estate, for instance, may take a bit longer to regain. These projects are often larger, long-term and complex which drives demand for specialist risk solutions. Structural challenges such as skills shortages, regulatory complexity, and geographical volatility remain and continue to put pressure on project timelines and execution.

Implications for the Insurance Market - The evolving dynamics present a gradual increase in demand for the C & E insurance market. It also requires technical underwriting discipline with a focus on risk quality. Insurers had become cautious during the downturn, and as activity increases, there is an opportunity for growth, but it requires insurers to align with the changing risk profiles.

It is important to note that the nature of C & E risk is evolving. Projects are becoming more complex and sophisticated, often incorporating new technologies, cross-border considerations and sustainability requirements. There is an introduction of new risks related to design and engineering as well as cyber exposures associated with digital construction.

Mukfin’s Positioning - At Mukfin, we combine our technical expertise with our knowledge of the market dynamics across Africa and other emerging markets. We acknowledge that the upswing in construction not only reflects volume growth but also the need for tailored and resilient solutions that address the complexity of modern projects.

‍