Rate predictions
| Trend | Range | |
|---|---|---|
| Surety |  |
Flat |
Key takeaway
Post-COVID economic issues will challenge companies significantly in 2022. Adverse conditions created by labor shortages and supply chain instability will impact both top and bottom-line results. Surety programs offer options for companies to respond to these challenges, adjust operations and prepare for an inevitable inflationary marketplace.
U.S. marketplace
- The electronically executed bond acceptance rate continues to increase due to the surety industry’s efforts to get federal, state and local entities comfortable with the process and product. Ongoing changes in the way work is done provide strong supporting logic.
- Rates have stabilized across industries. Damaged industries (travel and hospitality, etc.) are seeing rapid improvement. Private equity is becoming a significant component in recovery and growth.
- As surety and brokerage companies face talent crises, the rise of the work-from-home culture may help the industry attract and retain high-performing employees.
- Industry consolidation continues in the broker space while the competition for talent remains high. Top level moves as well as aggressive pursuit of experienced industry professionals should reach a fever pitch in Q2 2022 as the economy emerges from COVID-choked conditions.
- Low-to-moderate uptick in claim activities due to the pandemic has fueled competition for business. The surety industry has done a good job at managing claim fall out, and while certain areas will have ongoing litigation (force majeure, delay impacts, cost increase drivers), the industry outlook appears positive.
Global surety
- The construction sector globally is beginning to rebound, which should yield project restarts well into 2022. Labor and material shortages will continue to plague the recovery, while the looming specter of inflation could create havoc with schedules and timelines.
- Cashflow and liquidity management will take a different course in 2022 as cost management faces labor and material inflation challenges. Credit costs appear to be stable at near all-time lows.
- Bonding for subcontractors on private and public projects is expected to remain active. General contractors will continue to use subcontractor bonding as evidence of the subcontractor’s financial qualifications.
- Significant infrastructure investment is near certain; however, the timing is unclear, and the actual application of the funding to traditional projects has yet to come into focus. A shift of funding to new project categories, such as technology and social outreach, could impact long-anticipated projects.
