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In the 1990s, Surety companies were making a lot of money thanks to a booming economy that kept contractors busy and solvent. Insurers flooded the Surety marketplace to take advantage, prices dropped, and excess capacity built up. Predictably, when the recession of the early 2000s hit, contractor defaults led to record Surety losses—with loss ratios climbing from 20 percent in 1998 to 75 percent in 2004—and insurers exited the market in droves. 


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