Based on the provisions of Act C of 2023 on Hungarian Architecture (Hungarian Architecture Act), which entered into force on 1 October 2024, the liability insurance rules for contractors have changed. Contractors may now only undertake construction activities for which they have compulsory contractors' liability insurance, in addition to the previously introduced investments, subject to simple notification.
Contractors were required to secure compulsory public liability insurance by 15 January 2025, and the Hungarian Chamber of Commerce and Industry (MKIK) started checking liability insurance in March 2025. Notably, some companies that had obtained the required insurance but failed to upload their documentation to the designated online platform have already been issued prohibitive decisions barring them from continuing construction activities.
For which types of activity should liability insurance be taken out?
Contractors subject to the insurance obligation include companies classified under TEÁOR 2025 codes 41.00 through 43.99, excluding code 43.60, and sole proprietors registered under ÖVTJ 2025 codes 410001 through 439906, excluding 436001. The exception in both cases pertains to agents involved exclusively in specialized construction services.
Scope and coverage requirements of liability insurance
The construction liability insurance must cover damages arising from violations of professional standards, legal regulations, or contractual terms in connection with construction activities. This includes personal injuries, property damage, and related non-material damages such as compensation for moral harm. The insurance must also include subcontractor coverage, meaning it must apply to damages caused by individuals employed by or contracted to the insured contractor.
Insurance coverage limits and categories
The minimum insurance coverage limits depend on the contractor’s net annual income from the previous year. Coverage requirements range from at least 20 million HUF per claim for smaller contractors to up to 200 million HUF per claim for those with the highest revenues. New contractors or those without sufficient financial history must apply the minimum coverage level.
Role of the MKIK in compliance monitoring
MKIK verifies the existence of valid insurance policies during the contractor’s registration and conducts annual compliance reviews throughout their operational period. Insurers are also legally obliged to report any policy terminations to MKIK within 15 days.
In March 2025, MKIK started to actively enforce these requirements, issuing formal decisions prohibiting contractors without valid liability insurance from undertaking construction activities. Such prohibitions remain effective until the contractor submits proof of insurance, but in no case exceed six months. Failure to obtain insurance within this timeframe leads to revocation of the contractor’s registration number and removal from the official contractor registry.
Contractor’s options following prohibition of professional activity
If MKIK prohibits a contractor from continuing professional activities due to missing liability insurance, the contractor can resolve the issue by submitting valid proof of insurance coverage. A common problem is that contractors have valid insurance but fail to send the policy documents and coverage certificate to MKIK. If the insurance has been arranged but not uploaded, the contractor should immediately upload the documents to the contractor registry via the MKIK website.
By Denes Glavatity, Attorney-at-Law, KCG Partners Law Firm
