Although 2009 will go down as a profitable year for sureties, it was not as profitable as the preceding four years. Surety underwriters expect a significant increase in losses in 2010 as the economic downturn begins to directly affect their business, particularly the contract surety segment. Contract surety accounts for approximately two-thirds of sureties’ aggregate premium volume, and profitability is heavily dependent on the health of the construction economy.
Surety rates generally are expected to remain flat so long as the underwriting diligence of the past 12 to 18 months produces a manageable surety claim scenario in 2010. Close underwriting will continue to take place in the surety business line through 2010 and likely into 2011.