Data center boom stretches subcontractors thin, and a default insurer says the warning signs show up early

Jim Richert, who heads subcontractor default at AXA XL, told Insurance Business that in most defaults the insurer tracks, a concern was flagged up front and then ignored or not handled well. Losses are also getting bigger. A midyear 2026 report on surety and SDI from The Baldwin Group found claim frequency roughly flat but severity rising, as larger trade contracts, rework and specialized replacement labor push costs up.

Richert said data centers are drawing established trades, which leaves openings for smaller subcontractors in sectors such as healthcare, where their capacity needs a hard look. AXA XL often sees the same trade contractor put forward for its largest-ever subcontract on several projects in a row, he said. In a September commentary for IRMI, AXA XL's Cheri Hanes wrote that mechanical, electrical, civil and utility subs are often spread across several projects at once, and a firm that does well on ordinary commercial work may struggle at hyperscale size and pace.

The warning signs the AXA XL specialists listed: fewer workers on site than planned, missed schedule dates, more work failing spec, slower replies or meetings attended by people who cannot make decisions, a messy site, sudden jumps or drops in revenue, and payments running ahead of finished work. Ricardo Miramontes, who works on construction risk engineering for AXA XL, said prequalification only captures a snapshot. He described a GC whose field team noticed thin crews and slow answers; a second look by its prequalification staff found the sub had taken on other contracts.

Richert suggested quarterly financial reviews and asking subs what they plan to bid next, since a year-end statement goes stale fast. By a January estimate from Associated Builders and Contractors, the industry must add a net 349,000 workers in 2026 and 456,000 in 2027.