In the 1990s, Surety companies were making a lot of money thanksto a booming economy that kept contractors busy and solvent.Insurers flooded the Surety marketplace to take advantage, pricesdropped, and excess capacity built up. Predictably, when therecession of the early 2000s hit, contractor defaults led to recordSurety losses—with loss ratios climbing from 20 percent in 1998 to75 percent in 2004—and insurers exited the market indroves.
The Surety market has since recovered, and theline has been a very profitable business for insurers over the lastseveral years. As a result, capacity is increasing in both Contractand Commercial Surety.
“Carriers are looking at the Surety market as a line of businessthey can enter and make underwriting profits because of the lastseveral years of good returns on the line,” says Geoffrey Heekin,managing director of Aon Risk Solutions' Construction ServicesGroup.
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