Page 20 - Insurance Times April 2021

business performance and credit score of the business X Economic uncertainty that is leading to reduced
owner, which is between 1-15% of the bond. volumes as investment decisions are deferred

Figure 3 to the right provides a recap on the three X On the flip side are multiple enquiries from
parties to a Surety Bond. multinationals looking for large customs bonds
Majority of countries have not witnessed significant
increase in numbers of global surety players entering
in their market in recent times. Europe, on the other
hand, has noticed a slight expansion of global players'
entering markets to fulfil the demand.
United Kingdom (UK) is facing similar issue of ageing
infrastructure like many developed countries. UK's
ageing roads along with Victorian Rail Network offer
opportunities for the investments in the reconstruction
of infrastructure. This will boost surety Bond sales.
Similarly, other countries in the European region face
same issues. For instance, Romania is facing run-down
energy infrastructure.

Carriers are focusing on providing digital products and
e-bonding capabilities for customers. E-bonds are
becoming more accepted by beneficiaries in many
Figure 3 - Parties to a surety bond
European countries; customers are making bond
requests via online portal of carriers.
B. Product Trends
Subcontractor Default Insurance (SDI) - There has been Example: Euler Hermes is having an offering focused on
a fair amount of movement around SDI - as some SMEs in the construction market in France. It is an
markets have exited or pulled back while new entrants automated solution where customers can go onto their
have come in. SDI continues to be an attractive product portal, apply for bonds and automatically get a
and that should continue into 2021 and beyond. response, including pricing limits. Once the After
finalisation of the bond contract, they issue an e-bond
The contract bond captures a significant share of the
using an automated process.
surety bond market and growing continuously; this is
due to rapid increase in construction activities, in B. North America and Mexico:
regions like APAC, Europe, and MEA.
UNITED STATES
Contract surety bonds are replacing other guarantee X The infrastructure of developed economies like US
methods like bank guarantees and pay on demand are ageing, creating a need for massive
services. investments towards restoration.
Insurers are focusing on providing digital products and X As per the American Society of Civil Engineers, the
e-bonding capabilities for customers. E-bonds are U.S. would need around US$ 4.5 Trillion by 2025 to
becoming more accepted by beneficiaries in many upgrade the state of its roads, bridges, airports,
European countries; customers are making bond dams, schools, and more.
requests via online portal of insurers.
X Moreover, ageing power generation and
distribution infrastructure are becoming a key
Market Trends in Surety Bond in Key biggest challenges for utilities in developed

Geographies countries. For instance, in the U.S., the power grid
is believed to be valued an estimated US $876
A. United Kingdom and Europe
Billion, renovating infrastructure would cost
Large players had good year in the UK (2019) and Ireland hundreds of US$ Billion, as per the U.S Department
last year and met/ exceeded targets. of Energy. Upgrading generation, as well as
There is Brexit to navigate with two sides to it: transmission facilities in these countries, would

20 The Insurance Times, April 2021