Commercial Properties Face Increased Under Insurance Risk

Commercial properties throughout the UK are at an escalating risk of underinsurance in 2026, as highlighted by RebuildCostASSESSMENT.com. This growing concern stems from rising rebuild costs, changes in regulations, and increasingly complex rebuilding requirements, which could leave even well-managed property portfolios inadequately insured if their sums insured are not regularly updated.

Gautham Rajendar, Technical Lead for Commercial Properties at RebuildCostASSESSMENT.com, stated, “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.”

Recent statistics from the government indicate that the prices of construction materials remain elevated compared to the previous year. Data from the Department for Business & Trade shows that in January 2026, prices were approximately 2% higher than in January 2025, with even larger increases noted in sectors such as new housing materials and repair and maintenance.

Warehouses, manufacturing facilities, and retail spaces are particularly vulnerable, as their rebuilds often involve intricate electrical, safety, and mechanical systems. Regulatory changes further complicate the situation, as the Building Safety Act and evolving fire safety and energy efficiency standards can significantly raise rebuilding costs after a loss. If insured values are based on outdated or overly simplified figures, policyholders may encounter a financial shortfall when they need coverage the most.

Outdated or unsupported sums insured pose both financial and compliance risks. The Financial Conduct Authority’s Consumer Duty rules mandate that fair outcomes must be delivered for customers. Professional Rebuild Cost Assessments (RCAs) are essential for supporting coverage decisions with accurate and current rebuild figures.

Gautham Rajendar further noted, “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.”

For property owners, the path forward is clear: regular reviews of valuations are crucial, with a comprehensive RCA recommended every three years, or sooner if there are changes to the property. This practice ensures that coverage remains aligned with current rebuild costs and compliance requirements. As standards continue to evolve, the importance of accurate rebuild cost data is becoming increasingly paramount.