Surety professionals are facing a buyer's market, but they have opportunities to grow their businesses by providing valuable expertise and building key relationships, say panelists who served on the State of the Industry Panel at NASBP's 2016 Annual Meeting
& Expo May 15-18, in Colorado Springs, CO.
The panelists convened after NASBP CEO Mark McCallum's address on the morning of Tuesday, May 17. McCallum served as moderator.
The panelists were Mike Bond of NASBP Affiliate Zurich North America; Joshua Etemadi of NASBP Member firm of Construction Bonds, Inc.—a Division of Murray Securus; John Knox of NASBP Affiliate SureTec Insurance Co.; and Bob Raney of NASBP Affiliate Travelers Bond & Specialty Insurance.
A soft market
Strong underwriting results are creating a soft market for surety products, panelists say. Contractors are seeing rates decrease and aggregate limits rise, Etemadi says.
“The influx of new capacity is creating even greater competitive conditions,” Knox says.
Etemadi says the next couple of years remain a source of concern. “Now that the economy is getting back to its feet and contractors take on more work, we run the risk of providing excess capacity that our contractors cannot handle, leading to increased claim activity,” he says.
Bond notes that, in the current high-risk environment, the surety industry is doing a “tremendous job in pre-qualifying contractors, protecting taxpayer dollars, and helping to guarantee performance of construction and non-construction companies.”
“Issues exist from those who do not understand the substantial benefits of the surety product, and all of us need to promote the long-proven benefits of the surety industry,” he says.
Opportunities for growth
The economic environment provides an opportunity for producers to differentiate themselves by offering value-added consultation on business needs, risk assessment and contractual-risk mitigation, operational metrics, and business planning and continuity, Raney says.
“By sharing our expertise and experience in these areas, we can help contractors reach greater levels of success,” he says.
The surety industry also has opportunities for near-term growth by focusing on crucial partnerships, panelists say.
“Focusing on long-lasting relationships between underwriters and producers and leveraging off the relationship professional producers have with trusted accounts, creates slow but solid growth,” Knox says. “While others may stretch for growth, those who accept the slower, steadier approach will win.”
Communication and collaboration between underwriters and producers is key to delivering on the surety product's promises and meeting customer needs, Bond says.
“Underwriters and producers who understand the needs and challenges of customers will be highly valued and thrive going forward,” he says.
Etemadi says producers likely will be able to use the soft market to their advantage by seeking accounts in need of greater capacity. “Knowing what to look for in those accounts– cash-management practices, job controls –will be critical in picking up the 'right' accounts,” he says.
Surety professionals also can harness the U.S. Small Business Administration's Surety Bond Guarantee Program
to aid contractors facing difficult jobs, year-end losses or a need for higher bonding capacity, Etemadi says.