It's not fair not to pay the builder for work completed unless he agreed originally to wait for the insurance cheque, which most will do.
Insurance companies are very difficult and you might find they pay out less than the job costs, but that is not the builder's problem. It seems though in your case the figure has been agreed so you know you will get the money.
Not sure what you meant by retention, is it that the insurance company will hold some of the settlement until the loss adjustor or their expert certifies that everything is done correctly? If that is the case than you pay the builder for the job minus the retention.
Why are you unhappy with the work the builder did?