Surety Industry Tops $9 Trillion in Protection
Monday, April 16, 2018
For the second year in a row, the surety industry experienced record growth. In 2017, the direct premium written increased from $5.9 billion to $6.2 billion. This is the fifth straight year of steady increase. The industry premium has more than doubled over the past two decades – up from $2.9 billion in 1998.
The statistical department of The Surety & Fidelity Association of America (SFAA) reviewed the data from 2013 to 2016 and reported the areas of largest premium increases were in private contract bonds and judicial court guarantee bonds. Other areas with significant premium increase include: airport buildings at state/municipal, federal and private level; private building and building related construction; private completion bonds; state/municipal subdivision bonds; coal reclamation bonds; and mechanic’s lien bonds.
“The increase in premium indicates that public and private owners, banks, and state and local leaders see value in our product,” says Ross Fisher, chair of The Surety & Fidelity Association of America and senior vice president of Specialty Commercial at The Hartford. “What is interesting is the significant increase in the use of surety bonds in private construction. Savvy construction lenders, developers and private owners understand that surety bonds provide the most comprehensive protection – ensuring that the contract will be completed and workers will be paid.”
“It makes perfect sense for an increasing number of private owners to require surety bonds,” said SFAA President Lynn M. Schubert. “With surety bonds, the risks of contract completion are shifted from the owner to the surety company. Requiring surety bonds in private construction protects companies and shareholders from the enormous costs of contractor failure.”
Since 1998, the surety industry has protected more than $9 trillion in contract and commercial surety exposure - $600 billion in 2017 alone. Approximately $25 billion in losses were paid out, and another $50 billion in loss adjustment, underwriting and general expenses were incurred since 1998. The continuing low loss ratio signals that the adherence to underwriting criteria and prequalification, along with a greater emphasis placed on efficiency regarding expenses, remain strong factors in the industry’s growth.
“The expansion of the private construction market demonstrates that the promotional and educational efforts on behalf of the industry have raised awareness on the benefits of surety bonds and have shown others what we in the industry have known for years – that bonding protects,” said Mr. Fisher.
View the March/April 2018 Newsletter