Navigating the Post-Disaster Insurance Recovery Process

Natural disasters continue to pose significant challenges for real estate and construction companies in 2026. From severe weather events to wildfires and flooding, the impact on physical assets, operational continuity, supply chains, labor markets, and contractor relationships can be profound. While the cause of such disasters is often clear, the insurance recovery process remains complex and can be prolonged due to resource constraints and increased demand for adjusters and labor.

To streamline recovery, industry leaders must stay informed about their insurance policies, understand the risks unique to post-disaster scenarios, and proactively address potential pitfalls. Taking the right steps immediately after a disaster can make a critical difference in the speed and success of recovery.

Key Risk Areas in 2026

Contractor and Subcontractor Relationships

The demand for skilled labor surges after a disaster, often resulting in additional fees from contractors and subcontractors for work outside the original contract scope. These surcharges can accumulate quickly, sometimes reaching 40–50% above initial estimates. Builder’s risk policies may include new limitations on fee increases, leading to potential disputes over coverage and payment responsibilities.

Additionally, general contractors are frequently named as beneficiaries on insurance policies for ongoing projects, even when the policyholder is the property owner. This arrangement can create tension if insurance does not fully cover rebuilding costs, potentially delaying recovery and straining key business relationships.

Supply Chain Costs

Expediting expenses to secure materials and resources remain a major concern, especially following large-scale disasters that disrupt entire regions. In 2026, global supply chain volatility and shifting trade policies—including tariffs—can further inflate costs. Companies lacking coverage for expediting expenses may face significant out-of-pocket costs or extended recovery timelines. Monitoring policy changes and maintaining flexible coverage is essential to manage these risks.

Interest Rates

While interest rates softened moderately in late 2025, uncertainty remains as to the outlook for the balance of 2026. Delayed construction projects often lead to higher incremental costs on outstanding construction loan balances. While many insurance policies cover these additional interest expenses, coverage limits vary. Developers should review their policies to ensure adequate protection, as any shortfall could add to the financial strain of disaster recovery.

Avoiding Insurance Recovery Pitfalls

Best practices for successful insurance recovery fall into two main categories: understanding policy nuances and maintaining comprehensive documentation.

Navigating Policy Nuance

Insurance policies are increasingly complex, with subtle limitations that may not be immediately apparent. Disputes often arise from differing interpretations of coverage, especially between owners and contractors. Proactively reviewing all policies and clarifying coverage details—such as the scope of builder’s risk policies and the extent of delay-related coverage—can help prevent misunderstandings and facilitate smoother recovery.

Maintaining Robust Documentation

Accurate and thorough documentation is crucial for substantiating insurance claims. The burden of proof lies with the policyholder, making it essential to preserve all relevant records, including:

• Detailed notes of verbal communications.
• Copies of correspondence with clients, vendors, suppliers, and customers.
• Up-to-date construction schedules and records of deviations from planned timelines.

Regularly updating documentation throughout the project lifecycle enables companies to clearly demonstrate the impact of a disaster, expediting the claims process, and improving the likelihood of a favorable outcome.