The U.S. surety market hasexperienced robust premium growth in recent years, driven by strong demand forcontract bonds tied to large-scale infrastructure spending and generalincreases in contract sizes stemming from inflationary cost pressures. However,against this backdrop of growth, surety loss ratios have trended upward,prompting a noticeable shift in underwriting posture across the market.

Why Underwriting Conditions Are Tightening

Underwriting conditions have tightened as carriers respond to a measurable increase in loss activity. Direct loss ratios for U.S. surety writers reached their highest levels in five years during 2024. While loss emergence appeared to stabilize through much of 2025, the construction market entering 2026 continues to face persistent inflationary pressures, labor shortages, and execution risk.

In response, underwriters have become more selective, placing greater emphasis on financial strength, backlog quality, and overall risk profile. Just as importantly, sureties are placing increased weight on qualitative factors, including management depth, internal controls, and how contractors proactively identify and respond to issues on active projects.

What This Means for Contractors

For contractors approaching their next bonded opportunity, expectations have increased. Minimum equity and working capital thresholds have risen to support overall bond programs and individual projects. Contractors may be asked to inject capital or enter into retention agreements to meet higher equity and working capital requirements.

Interim financial reporting and more frequent job-level updates are becoming increasingly common. Other underwriting tools may include job-level profit retention mechanisms that act as pseudo-collateral, the posting of additional collateral where available, or expanded requirements for subcontractor bonding to help mitigate downstream risk.

Preparing for a More Disciplined Surety Market

As the underwriting landscape continues to evolve, navigating this more disciplined environment requires preparation and strategy. Engaging a knowledgeable surety agent early in the process can help contractors anticipate underwriting expectations, position their financials effectively, and implement risk management practices that support sustainable bonding capacity in a tighter market.