Commercial Surety Bonds Are Vital for Many Projects. Automation and Dedicated Underwriters Make Them Even More Potent
White Paper Summary
The $1 trillion Infrastructure and Jobs enacted in 2021 has pumped billions of dollars into communities so that they can invest in building roads, bridges and improving power systems.
Now as those projects are getting underway, they’ll need support from surety bonds. These financial tools help ensure that projects are completed on time. A contractor purchases a bond and the surety partner agrees to meet the obligations of a given project if something happens and they’re unable to finish the job.
“I think it will end up really helping our industry grow,” said James Crinnion, chief underwriting officer and VP of commercial surety for Philadelphia Insurance Companies (PHLY), in referring to the Investment, Infrastructure and Jobs Act which was signed into law in late 2021 and which will pump hundreds of billions into infrastructure projects.
Though common in the construction industry and required for government work, surety bonds can support a wide range of projects, from building roads and bridges to guaranteeing the construction of large oil tankers.
Increased infrastructure investments may be spurring the demand for bonds, but surety partners may find that their reinsurers are beginning to restrict capacity, often as the result of frequent losses caused by natural catastrophes over the last few years. These restrictions can have ripple effects for bonds.
“The reinsurers definitely have their marching orders to raise rates on all lines, even if they weren’t affected by the cats,” Crinnion said. “It affects surety even if we didn’t hit the treaty. It trickles down, there’s no doubt about it.”
To navigate this new terrain, agents and brokers working with companies in need of commercial surety bonds should seek out partners that combine strong technological capabilities and a team of dedicated underwriters committed to domestic and international growth. These companies can balance the need for surety bonds even as reinsurers are rebalancing their appetites for certain exposures.
To learn more about Philadelphia Insurance Companies, please visit their website.