Contract surety
The construction surety market has remained stable for an extended period, with no industrywide shifts expected in 2026. Significant macroeconomic movement would be required to change this outlook. Even though capacity and pricing remain stable, pockets of stress exist from concentrated surety losses and tightening of reinsurance.
Construction sectors expected to remain resilient through 2026 include infrastructure, energy, renewables, data centers, manufacturing, and healthcare. Surety underwriters are applying greater scrutiny to private equity-backed contractors, reflecting heightened sensitivity to financial leverage, growth pace, and capital structures. This segment would likely be the most sensitive area of the contract surety market if loss activity were to materialize. Broadly, sureties are applying closer scrutiny to large, complex deals. Smaller sureties are particularly sensitive to their portfolio risk and concentrations of exposure.
Increasing project values are driving greater demand for surety capacity. Data center campuses, for example, represent multibillion-dollar investments with highly compressed schedules. A decade ago, projects of this scale would have strained the surety market. Capacity is generally plentiful for sophisticated, well-capitalized contractors. Co-surety arrangements have become a common mechanism for supporting large, capital-intensive programs while managing aggregate exposure.
An area to monitor in 2026 is the continued movement of experienced surety professionals across the market. Many experienced professionals are joining newer entrants, including both carriers and brokers. In the event of significant losses or systemic change, there is a risk that underwriting reactions could be more abrupt as fewer professionals have firsthand experience managing prior market stress cycles.
To mitigate volatility in their surety programs, contractors can:
Be selective about bids. Not every project falls within the operational capabilities of every contractor. Viewing each opportunity through a risk lens enables contractors to improve their odds of success.
Thoroughly review contracts. It’s critical to understand contractual risks as part of project selection so contractors can avoid surprise liabilities. Larger project values amplify assumed contractual risks. Owners and upstream general contractors are increasingly pushing risk down the contract chain, making disciplined contract review and negotiation more important than ever.
Implement robust project controls and financial reporting. Operational discipline and transparency are essential to maximize bonding capacity and mitigate surety losses.
Nurture relationships with surety partners. Contractors should communicate early, especially on large bid opportunities, with their surety partners. Surety brokers and underwriters frequently have knowledge and resources that can help contractors win business and support contractors’ growth plans. As capacity needs grow, preemptively engaging a backup or co-surety partner is critical.
