Unlocking Mass Timber: Strategies for Risk and Insurance

Unlocking Mass Timber: Strategies for Risk and Insurance
June 11, 2025 9 mins

Unlocking Mass Timber: Strategies for Risk and Insurance

Unlocking Mass Timber: Strategies for Risk and Insurance

Mass timber construction is gaining traction for its sustainability and efficiency, yet it brings distinct insurance and risk management challenges that require industry collaboration and proactive strategies.

Key Takeaways
  1. Mass timber offers both environmental and economic benefits, such as lower carbon emissions and faster construction. As the need for sustainable solutions grows, managing risks like fire safety and water damage is key to maximizing its potential.
  2. Limited historical data on mass timber makes it challenging for insurers to develop comprehensive underwriting practices. Gathering data and educating stakeholders will be crucial to support the increasing demand for mass timber projects.
  3. Businesses can mitigate mass timber risks and optimize its construction benefits by planning early, ensuring strong moisture management and partnering with skilled insurance brokers.

Mass timber is a family of products that share the commonality of having large dimensions. Historically, large-dimensioned solid timber has been used as structural supports in buildings. More recently, the product class of engineered wood products has grown in popularity, which includes wood products that are manufactured to increase their size and strength. While there are many types of engineered mass timber, the most commonly used in the market today are cross-laminated timber (CLT) and glue-laminated timber (Glulam). 

Mass Timber Adoption

Mass timber is increasingly utilized as a sustainable construction material due to its environmental benefits and aesthetic appeal. In the U.S.,1 projects are growing annually by 18 to 20 percent, while Canada2 boasts nearly 700 completed mass timber buildings, with over 140 projects underway or planned as of June 2024. The UK anticipates growth due to supportive policies,3 but fire safety concerns persist. Asia Pacific, Japan4 and Singapore5 lead with advanced adoption and government backing, while China6 and South Korea7 are making strides in sustainable construction. 

Mass timber adoption in Europe is mixed. Countries with strong forestry industries, such as Austria and Sweden, have leveraged their expertise. Further, the growing emphasis on sustainable building practices and carbon reduction has helped advance mass timber construction. In Germany and other areas, however, political dynamics and stringent building codes have slowed down its adoption.  

Regional Spotlight: Global Perspectives
Mass Timber Global Perspectives

Opportunities and Obstacles

There are many benefits associated with the use of mass timber, the primary one being the reduced carbon footprint of buildings, as it has lower embodied carbon than steel or concrete. Timber has a high strength-to-weight ratio, which often means reduced foundation requirements, also adding to the reduction in the overall carbon footprint. 

Prefabrication elements equate to shorter site time and reduced labor, which can provide schedule and cost savings. Its flexible design also allows for full mass timber structures and hybrid structural designs with other materials. Exposed mass timber can create architectural interest and promote a number of biophilic benefits for occupants. 

Despite these advantages, several challenges hinder the widespread adoption of mass timber. Limited historical data on the repair and replacement of mass timber structures presents a significant challenge for insurers. Additionally, regulatory hurdles in some jurisdictions, cost considerations, and the need for specialized skills and knowledge are obstacles that must be addressed.

Aon’s Global Mass Timber Working Group leader, Alicia Clendenan notes, “The overall level of investment in increased manufacturing capabilities, combined with building code and developmental policy shifts toward lower carbon construction, signal that mass timber will continue to be an important construction material in many regions of the world.”

Mass Timber benefits and Risks

The Need for a Full-Cycle View of Risk

As mass timber construction becomes more popular, it also presents specific operational insurance and risk management challenges.

For instance, problems can arise after mass timber construction is complete, with water, moisture and mold concerns remaining core issues for insurers in the property space.

Many insurers are hesitant to take on the unknown risks associated with mass timber, often restricting their capacity or refusing mass timber risks altogether. This reluctance causes difficulties for insureds with a portfolio of properties. Some insurers want the newer mass timber buildings to be placed standalone outside of the main insurance program, thus preventing them from benefiting from portfolio rates and terms. Project owners and managers may, therefore, struggle to find appropriate coverage for their new mass timber assets.

To mitigate these challenges, it is important to design with modularity, ensuring a clear and relatively simple way to replace specific structural elements in the event of a loss. Additionally, documenting in much greater detail during the construction phase improves the quality of information for operational submissions. Engaging incumbent insurers early and involving their risk engineers in site reviews during construction can also help to avoid potential claims and secure appropriate coverage. 

Understanding Insurer Mass Timber Hesitation 

  • Lack of Comprehensive Points of Reference
    • Insurers often incorrectly compare mass timber to light wood frame construction due to the wood component, leading to a total loss scenario approach and high rates for limited capacity. 
    • They seek more data, best practices, standards and evidence of proper project execution than is currently available.
    • Opinions are heavily skewed by a few widely known losses because there isn’t enough data to affirm that these are outliers.
  • Evolving Underwriting Guidelines
    • Many insurers treat mass timber projects as unique risks requiring extensive internal referrals, resulting in longer cycle times and inconsistent messaging.
    • Some insurers have developed growth targets and specific insurance products for mass timber projects. However, the application of this knowledge varies greatly between regions and even among individual underwriters of the same insurer.
  • Fire and Water Damage Concerns
    • Some insurers understand mass timber's fire-resistive properties but struggle with potential water damage losses. 
    • Hybrid designs incorporating concrete, steel or other materials add complexity and technical considerations, including concerns about connecting dissimilar materials with metal connectors. This can deform and transfer heat during fires and moisture transfer from concrete to wood.
  • Technical Complexity and Modular Considerations
    • Some insurers have reduced appetite for modularization and pre-fabrication classes, fearing repetitive error risks. 
    • Insurers also question the feasibility of in-situ repair versus replacing damaged timber members, causing potential client conflicts.
    • Bespoke elements may require long lead times that exacerbate delays and associated costs when they need to be replaced.
  • Market Entry Dilemma
    • Due to the lack of claims data necessary for actuarial pricing and oversight in mass timber underwriting, many insurers face the challenge of writing projects to gather first-hand data despite the absence of existing data.
  • Perception of Novelty
    • There is a general uneasiness about mass timber's novelty and rapid growth. Even the most experienced project teams lack the extensive experience found in steel and concrete construction.

Building a Greener Future

Despite challenges, mass timber construction is growing, with project starts and completions on the rise and increased global investment in manufacturing capacity.

In North America, mass timber project starts are expected to double every two years over the next eight years,8 indicating consistent industry growth. Similarly, Asia Pacific — especially Japan, China and Australia — is advancing in mass timber adoption due to robust forestry resources and new manufacturing capabilities.

“As more regions adopt mass timber, it will drive sustainable forestry practices and smarter supply chains,” says Vincent Banton, leader of Aon’s Construction and Infrastructure for Asia. “It will also encourage creative and sustainable designs, positioning mass timber as an increasingly viable option for modern construction.”

The industry can anticipate:

  1. Standardization
    A shift toward more standardization in panel sizes and beam dimensions, as well as refined modular construction designs, especially for housing projects addressing affordability and or remote location challenges. 
  2. Sector-Specific Expansion
    Mass timber is gaining traction globally in community, residential, commercial and industrial sectors. Updated building codes and manufacturing advancements support the growth, while standardization and sustainable practices are making it more attractive for various construction applications worldwide.
  3. Innovative Applications for Sustainability
    Mass timber is now being utilized in innovative applications, such as data center construction, to promote sustainability and reduce the carbon footprint of high-energy facilities. Manufacturing facilities are increasingly looking to add mass timber elements to their new buildings for the benefit of their employee wellbeing and retention. Warehouses are utilizing manufacturing for the carbon offsets and reduced site time of construction and building codes continue to adapt with some allowing mass timber in taller buildings (“plyscrapers”).
 

Mitigating Mass Timber Risk: 3 Top Tips

Engage with Aon’s specialists to explore how we can support your mass timber projects. Contact [email protected] or reach out to your local Aon representative.

 

1 Mapping Mass Timber, WoodWorks
2 The Mass Timber Roadmap | An integrated forest-to-buildings value chain, Forest Products Association of Canada
3 Timber in construction roadmap 2025, GOV.UK
4 Timber Construct 2025
5 ‘Like entering a forest’: Inside Asia’s largest timber building, CNN
6 China’s Green Switch: Timber-Concrete Key to Massive Hospital, Wood Central
7 Boom in Large-Scale Wooden Building Construction Across South Korea, Canada Wood
8 A Credit Perspective on Mass Timber, As Its Use in U.S. Construction Projects Builds, Morningstar DBRS

Aon's Thought Leaders

Alicia Clendenan
Global Mass Timber Working Group Leader
Director of Sustainable and Alternative Construction, Canada

Vincent Banton
Head of Construction & Infrastructure, Asia Pacific

Jon Chapman
Practice Leader, Construction & Infrastructure, Europe, the Middle East and Africa

General Disclaimer

This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

Terms of Use

The contents herein may not be reproduced, reused, reprinted or redistributed without the expressed written consent of Aon, unless otherwise authorized by Aon. To use information contained herein, please write to our team.

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