Surety- State of the Market

Now is a good time for contractors to take advantage of the state of the Surety Market. The current Surety Market is what the experts call a “Soft Market” which spells “easier terms”.   This competitiveness is driven by the surety industry’s excellent loss ratios and additional capacity entering the market.

Small business/mid-sized markets have become very flexible. According to the Engineering News- Record, “This is due, in part, to the U.S. Small Business Administration (SBA) Surety Bond Guarantee Program and its img11recent change to provide a higher limit of $6.5 million.  Additionally, the Fast-Track programs, those underwritten based upon personal credit scores with a single job up to $500,000, are available for this market.”  As a result, small companies have been increasing their bond appetite for this particular situation.

“Large” and “Mega” markets offer the most flexibility in terms due to new surety capacity in the market.  According to Courtney T. Walker of Berkshire Hathaway, “Multiple markets are available creating plenty of capacity, and sureties will seek reasonable terms and conditions.”  This trend should remain throughout the rest of the year.

One of main ways for this current situation to change is if there is a downward slide in the market. According to Euler Hermes, “That is not expected to change.”  Loss ratios are favorable and contractors’ profit margins are increasing.  According to Lynne Cook, Senior Vice President at Early, Cassidy & Schilling, Inc., “Smart contractors are making a conscious decision to not take work at a low price and to wait until it reaches higher profit margins.  They choose to act on their own terms.”

All indicators point to now being the time for contractors to take advantage of the market for obtaining surety bonds before it becomes a “Hard Market” again and becomes increasingly more difficult.

Any questions regarding this? Contact Eric McBride, Assistant Vice President, via email at mcbrideec@ecsinsure.com or by phone at 301-948-5800 ext. 178.

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