News

The latest construction figures released in April 2025 showed a modest improvement in activity, with output rising during February after a weaker start to the year.

Office for National Statistics data published on 11 April showed that monthly construction output increased by 0.4% in February 2025. New work rose by 0.3% and repair and maintenance by 0.5%. Over the three months to February, total construction output was unchanged, with a 1.2% rise in new work offset by a 1.5% fall in repair and maintenance.*

Later in the month, Insolvency Service figures showed 1,992 registered company insolvencies in England and Wales during March 2025, 2% lower than February but 9% higher than March 2024.**

For specialist contractors working in areas such as roofing, waterproofing, cladding and glazing, these conditions reinforce the importance of protecting guarantees that may need to remain effective long after the original works have been completed.

Why Insurance Backed Guarantees Matter

An Insurance Backed Guarantee, or IBG, is designed to provide insurance protection behind an eligible contractor's own guarantee.

The contractor remains responsible for its workmanship guarantee in the first instance. The insurance-backed element may respond if the contractor later ceases trading and the policy terms and conditions are satisfied.

This makes an IBG particularly relevant where the underlying guarantee is intended to remain in force for a number of years.

More information is available on our Insurance Backed Guarantees page.

Specialist Construction Works Can Carry Long-Term Exposure

Many specialist construction systems are expected to perform for years after the works are completed.

Depending on the insurer and scheme, an IBG may potentially be available for works including:

• roofing systems;
• waterproofing;
• tanking;
• glazing;
• cladding and façade works;
• solar installations;
• piling and specialist groundworks; and
• other specialist construction packages.

Availability varies between providers, and the type of work, contractor and guarantee period will all influence whether cover can be arranged.

Roofing and Waterproofing Are Common IBG Requirements

Roofing and waterproofing works are a common area for IBG requirements because problems may not always become apparent immediately.

A defect in a membrane, roof covering or waterproofing system may only become visible after prolonged exposure to weather or once the building has been occupied for some time.

The contractor's own guarantee therefore has value beyond practical completion.

Where the contractor later ceases trading, an appropriate IBG may provide additional protection to the beneficiary, subject to the terms of the policy.

An IBG Is Not a General Defects Policy

It is important to understand what an Insurance Backed Guarantee does and does not do.

An IBG should not be assumed to cover every possible defect or failure associated with the project.

Cover depends on:

• the contractor's underlying guarantee;
• the insurer's policy wording;
• the type of work insured;
• the guarantee period;
• the circumstances in which the contractor has ceased trading; and
• any exclusions or conditions within the policy.

The actual terms should therefore be reviewed rather than relying on the general description of the product.

Why Contractor Insolvency Matters to Long-Term Guarantees

The insolvency figures released in April demonstrate why project stakeholders continue to consider what happens if a contractor is no longer trading when a defect emerges.

A workmanship guarantee from a financially sound and established contractor can provide valuable protection, but circumstances can change over a long guarantee period.

An IBG is intended to address part of that risk by providing insurance support behind an eligible guarantee.

This is especially relevant where the employer, property owner, lender or another interested party requires the guarantee to remain effective for a defined period after completion.

IBGs Can Be Required by Third Parties

The request for an Insurance Backed Guarantee does not always originate with the property owner.

Depending on the project, an IBG may be requested by:

• a lender or funder;
• a developer;
• a main contractor;
• a structural warranty provider;
• a building owner; or
• another party with a contractual or financial interest in the works.

The requirement should always be checked against the specific contract or project documentation.

Retrospective Cover May Sometimes Be Possible

An IBG is easiest to arrange when the requirement is identified before the work is completed.

However, retrospective cover may sometimes be available where the works have already been finished.

This will usually depend on the insurer being satisfied with the contractor and the evidence available about the completed work.

Information may include:

• the contractor's original guarantee;
• invoices;
• completion records;
• details of the system or materials used;
• photographs or inspection information; and
• details of any known defects or claims.

Retrospective availability is subject to underwriting and should not be assumed.

The Contractor Is Still Underwritten

Although the policy relates to completed works, the insurer will usually still assess the contractor seeking the IBG.

That assessment may include:

• trading history;
• experience in the relevant trade;
• financial position;
• claims history;
• the contractor's own guarantee wording;
• the type and value of work; and
• the period of cover requested.

Newer businesses, sole traders and smaller contractors may potentially be considered, but acceptance depends on the insurer and the individual case.

IBGs and Performance Bonds Serve Different Purposes

Insurance Backed Guarantees are sometimes discussed alongside surety products because both can appear on construction projects, but they perform different functions.

A Performance Bond typically supports contractual performance while the main contract is being delivered.

An IBG, by contrast, is an insurance product that supports an eligible contractor guarantee after specialist works have been completed.

A project can therefore require both products without any duplication of their purpose.

Getting the Requirement Right Before Completion Helps

Where an IBG will be required, identifying that requirement early can make the process much easier.

The contractor can then confirm:

• the required guarantee period;
• the precise scope of work;
• the proposed contractor guarantee;
• the insurer's underwriting requirements;
• any inspection or evidence requirements; and
• whether the proposed works fall within the insurer's appetite.

This reduces the risk of discovering at completion that the requested cover cannot be provided in the expected form.

Long-Term Protection Remains Relevant in a Changing Market

The April construction figures showed some improvement in monthly activity, but company insolvencies remained elevated compared with the same period a year earlier.

For specialist construction works carrying long-term guarantees, that is a useful reminder that the financial position of the contractor can change after the project has finished.

Where suitable cover is available, an Insurance Backed Guarantee can form part of a wider approach to protecting those long-term obligations.