Commercial property owners are facing a rising risk of underinsurance as rebuild costs climb and regulatory pressures increase, latest industry analysis suggests.
Rising construction costs, more complex building requirements and tighter safety standards are all contributing to a growing gap between insured values and the true cost of rebuilding.
Data shows construction material prices remain elevated, with costs around 2% higher in January 2026 than a year earlier, alongside sharper increases in areas such as repair, maintenance and new housing materials.
At the same time, regulatory changes including the Building Safety Act and evolving fire and energy standards are adding further costs to redevelopment, increasing the risk that policies based on outdated valuations fall short.
INCREASED REBUILD COSTS
The issue is particularly acute for more complex commercial assets such as warehouses, manufacturing sites and retail premises, where specialist systems and fit-outs can significantly increase rebuild costs.
Gautham Rajendar, technical lead for commercial properties at RebuildCostASSESSMENT.com, says: “Commercial reinstatement is inherently more complicated than domestic rebuilding. Multiple occupancies, bespoke fit-outs and compliance standards all add to the rebuild cost, and those factors are often underestimated.
“Some insurers are placing greater emphasis on the evidence behind declared sums insured. They want to see that the figure has a clear factual foundation, rather than being based on a round number or a simple indexation uplift.”
The warning comes as firms face increased scrutiny under regulatory frameworks such as the FCA’s Consumer Duty, which requires fair outcomes and appropriate levels of cover.
Property owners are being urged to review valuations regularly, with full rebuild cost assessments recommended at least every three years to ensure policies remain aligned with current costs and compliance requirements.
Main picture: Commercial buildings are under increasing risk of being underinsured in 2026, so accurate rebuild cost data is becoming increasingly important. (Getty Images)
