Surety Capacity and Reinsurance
- Strong Capacity: The surety market has become highly competitive, giving well-qualified contractors a chance to secure better terms. Many insurance companies have increased their investment in surety lines to keep up with inflation over the past few years. Combined with new companies entering the market and strong profits for established insurers, this has created robust options for contractors with solid qualifications.
- Reinsurers Upping Attachment Points: Reinsurers have been raising attachment points for surety companies, reflecting a shift in strategy to manage exposure to larger losses, such as those in the oil and gas and large commercial sectors. While primary reinsurance carriers have enjoyed strong performance over the past decade, recent losses have led to increased attachment points and higher pricing for primary carriers. So far, this hasn’t impacted primary carriers’ underwriting practices, but it’s a trend worth monitoring if losses continue to rise.
Market Trends
- Cautious Underwriting: Underwriters are closely scrutinizing high-risk or complex programs, especially in light of reinsurance trends. Programs with greater uncertainty or weaker financial support are less likely to receive flexible terms. As a result, funds control companies have experienced increased demand in 2024, a trend they expect will continue.
- Private Jobs: In 2025, the trend of contractors being required to bond private projects is expected to continue growing. This shift reflects the construction industry’s evolving challenges, including the ongoing shortage of skilled labor. Financial institutions and private project owners are increasingly seeking additional layers of protection to mitigate risks.
Infrastructure Spending Driving Demand
- Government Spending Continues to Drive Construction Growth in 2025: The $1.2 trillion U.S. infrastructure bill continues to fuel demand in the construction industry, with significant investments in highways, bridges, and public transit systems. This government spending is expected to boost large-scale projects nationwide, creating opportunities for contractors while increasing the need for surety bonds to guarantee project completion and compliance.
Recommendations for Contractors
- Work with Experienced Advisors: The market’s stability doesn’t eliminate its complexities. Contractors and businesses should collaborate with knowledgeable surety advisors like our folks here at Alera who can help navigate underwriting requirements, manage risks, and secure favorable terms.
- Stay Prepared: With increased government spending and a more cautious approach from underwriters, businesses should collaborate with their advisors and ensure their financials and project plans are strong to access bonds easily.
