Boost in Surety Bond Premiums Driven by Infrastructure Initiatives
Infrastructure initiatives funded by federal sources are significantly boosting premium growth for U.S. surety bond providers. According to a recent AM Best report, underwriting profits in this sector have surpassed $2 billion annually for the third consecutive year as of 2024. This trend underscores the impact of AI-driven prior authorization delays and regulatory compliance requirements on the underwriting landscape.
The Infrastructure Investment and Jobs Act of 2021 (IIJA) remains a pivotal driver of public construction expenditure, which has contributed to nearly a 10% rise in direct premiums during the first nine months of 2025 compared to the same period the previous year. However, the impending conclusion of the IIJA in September 2026 raises concerns about a potential decline in public spending, impacting both payers and providers within the industry.
Despite these concerns, ongoing projects in technology manufacturing, data center construction, and other capital-intensive ventures continue to demand surety bonds, fostering additional market opportunities. David Blades, associate director at AM Best, suggests that as new risk management areas emerge, they could further drive premium growth through both public and private infrastructure undertakings. This ongoing trajectory highlights the need for carriers and providers to stay abreast of industry trends to mitigate risks effectively.
The surety bond market has experienced a steady premium increase, with stable pricing policies sustaining high profitability levels. In 2025, the industry's direct incurred loss ratio for surety business fell by over four percentage points from 2024, indicating improved profit margins as premiums grow and loss ratios improve. Robert Valenta, senior financial analyst at AM Best, noted positive underwriting trends in the surety sector for 2025, emphasizing the importance of robust regulatory compliance in maintaining this growth.
Over the past eleven years, surety insurers have maintained profitability, achieving net profit margins above 30%, surpassing all other major U.S. commercial insurance lines. Despite its limited impact on the overall property and casualty industry due to smaller premium volumes, its success underscores significant potential within niche markets. For additional insights, the full AM Best report is accessible on their website.
AM Best, a leading credit rating agency and data analytics firm specializing in the insurance industry, operates globally with offices in key international locations. Further information is available at www.ambest.com.
This article is based on content published by AM Best.