Page 21 - Insurance Times April 2021

draw significant investments; hence, the Surety X Legislation passed in 2017 in Ontario mandates
market is expected to grow. surety bonds for municipal contracts; it will
X The Surety market penetration rates in North probably expand the surety market in all sectors in
Canada.
America is higher than any other markets globally.
The driver is the U.S. State governments' laws that X Similarly as a knock down effect, in British
mandate surety bonds. Insurers rule the U.S. and Columbia, the B.C. Law Institute had conducted a
Canada Surety markets; banks play only a minor review of the Builders Lien Act to generate a report
role. containing reform recommendations. Subsequent
regulations followed to furnish the owner with a
X U.S. market differs from rest of world by requiring
labor and material payment bond or with a
bonds at 100% of contract value; surety represents
~1% of written premiums in U.S. P&C Industry. performance bond, if the contract price was above
a stipulated limit.
X The premium analysis shows the Surety Bond
Market Premium at 5,368.8 Million USD in 2017 X According to figures published in the "CANADIAN
with a combined ratio of 72.1 % growing from SURETY RESULTS 2018" , the Direct Written
Premium (DWP) in 2018 was ~$630 million CAD
4960.25 Million USD in 2008 with 67 %. (Institute,
with a growth from the previous year's DWP of
2019).
~$620 million CAD (Winter, 2019).
X Market share is concentrated with the top five
writers who contributed 3,165 Million USD in 2018 MEXICO
that is 48 % of total 6,582 Million USD in 2018; X Surety bonds have been an important product in
however, top 6-20 writers have nearly 30% of Mexico's insurance industry for decades
market share. Traditional commercial surety X The mature surety bond market comprise as of
products driven by statutory requirements are 2018, 16 surety companies with the five largest
License & Permit Bond, Court - Fiduciary Bond and
accounting for more than 80% of the total market.
Federal & Public Official Bond. These along with
Administrator surety bonds accounted for nearly
Specialty commercial surety market (Coal; Oil & two-thirds of total written premium. Analyzing
Gas; Waste Management; Environmental Hazard) results, the combined ratio deteriorated to 70% in
constitute around 31 % of the USA's Direct Written 2018 from 65% in 2017, with rise in acquisition
Premium in insurance while the rest 69 % comprises costs amidst market completion. (Best, November,
Contract Surety business (Carpenter, 2019). 2019).

X New and innovative surety bond products are being X Mexico government had announced a 2014-18
developed. Further, surety companies and brokers National Infrastructure Plan known as Programa
try to position surety bonds as an option to replace Nacional de Infraestructura (PNI). The estimated
letters of credit in situations where obligees are value of this plan is US$ 464 Million, which
receptive. Insurance program bonds, comprises public sector funding alone. Additional
environmental along with creative commercial funding through private sources are expected to
contracts are being issued and accepted recently. bolster the Mexico construction industry, which in
X The commercial surety continues to experience soft turn will propel the surety bond market (Global
market conditions, with competitive pressure on Surety Market to 2027 , Sample Report, 2019).
rates, expansion of capacity thresholds and X They identified six strategic namely: energy, water,
favorable underwriting conditions. A push for health, transport and communications, urban
revenue growth is growing at commercial sureties, development and tourism.
bringing with it pressure for innovative ideas.
C. Asia Pacific
CANADA In APAC region, the Surety market is expected to flourish
X Mandatory bonding on federal, state, and local during the current decade; the expected growth is
public construction projects which has existing and attributed to the increasing planned commercial and
fostered surety bond business since many decades residential construction in the emerging economies in APAC.
in the U.S is set to boost the business in Canada. Berkshire Hathaway Specialty Insurance Company (BHSI)

The Insurance Times, April 2021 21