| Trend | Range | |
|---|---|---|
| Surety |  |
Flat to +10% |
Key takeaway: The global construction industry continues to face downward pressure as high inflation and tightening monetary policies limit investment growth. We expect a protracted economic decline in China will have strong global implications. Global construction output is expected to expand 2.6% (2.1% excluding China) in 2024.
Commercial surety pricing remains flat except for bank deposit bonds, which are experiencing upward pressure of 10%+. Availability of the bonds remains limited with most sureties focusing on the largest of the banks. Many surety companies have exited the product line.
Digitization remains a major trend in the industry with greater regulatory impact as governments and insurance companies attempt to minimize cost, improve operational efficiencies, minimize fraud and ensure inclusive access.
Underwriting remains aggressive.
- Increased cost of capital makes credit product replacements more attractive.
- Capacity is readily available with expansion continuing following strong profitability in the surety segment.
- New surety companies continue to enter the market; however, the pace of entrants is showing signs of slowing.
Economic uncertainty is creating increased opportunities.
- According to Maximize Market Research, the global surety market, estimated at $17.2 billion in 2022, is expected to expand by 5.8% CAGR to $25.5 billion by 2029. North America will continue to be the largest user of surety, with the U.S. surety industry generating $4.7 billion in direct written premium for the 1H 2023 ending June 2023. This represents a 10.3% growth as compared to the $4.3 billion[1] of U.S. surety direct premium written as of 1H 2022 ending in March 2022. On an annual basis, the U.S. surety market generated $8.6 billion[2] in direct written premium in 2022. This represents a 15.7% growth as compared to the $7.4 billion of annual direct written premium generated in 2021. Profitable growth, sufficient reinsurance support, and continued new surety entrants should keep the market soft in 2024.
- The demand for commercial surety bonding is experiencing upward pressure, especially in the performance bonds and financial guarantee class codes.
- Bankruptcy filings and recapitalizations are drawing attention in the surety marketplace as companies try to identify trends and reduce exposure.
Increasing investment in energy is driving many sureties’ discussions.
- Traditional energy surety obligations are under review and nearly certain to require increases.
- Alternative energy opportunities continue to roll out across NA with solar leading the way. Understanding of the obligations is maturing, creating steady growth.
- Global infrastructure output will grow at an average of 6.3% from 2023 to 2027, with energy and utilities sector output expanding at an annual average rate of 6.4% as governments drive environmentally friendly energy generation including wind and solar. Global infrastructure is the one segment which continued to grow throughout the pandemic as governments focused on spending in this area to drive economic stimulus.
Disclaimer
Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
Footnotes
- The Surety & Fidelity Association of America, Quarterly Results 2Q 23 Return to article
-
The Surety & Fidelity Association of America, Top 100 Writers of Surety Bonds
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