Federally funded infrastructure projects continue to drive premium growth in the US surety market, with underwriting profits for the line exceeding $2 billion for a third consecutive year in 2024, according to a recent report by AM Best.
The rating agency said that federally funded projects linked to the Infrastructure Investment and Jobs Act of 2021 (IIJA) continue to fuel public construction spending, with direct premiums through the first nine months of 2025 up close to 10% compared with the same period a year earlier.
The report also noted that funding under the IIJA is set to wind down when the law expires in September 2026, which could lead to a slowdown in public spending.
Hi-tech manufacturing projects, the launching of new data centers, and other capital expenditure projects are also creating opportunities where there is a need for surety bonds.
David Blades, associate director at AM Best, said, “As technologies become more advanced and insurers consider expansion opportunities in emerging risk areas, the build-out through additional projects may spur future premium growth attributable to public and private infrastructure initiatives over the near term.”
AM Best observed that surety premiums have risen steadily in recent years despite relatively stable pricing, a trend that has continued into 2025.
The industry’s direct incurred loss ratio for surety business declined by more than four percentage points year to date through the third quarter of 2025 compared with the same period in 2024. With aggregate premiums higher and the loss ratio lower over the nine-month period, surety insurers may see an uptick in bottom-line profits for the year.
Robert Valenta, senior financial analyst at AM Best, said, “Results through the first nine months of 2025 show both continued growth for surety insurers and favourable underwriting trends.”
Surety insurers have maintained underwriting and operating profitability, generating net profit margins above 30% in each of the past 11 years, from 2014 to 2024.
By comparison, the surety line’s net profit margin has outperformed every other major US commercial insurance line over that period. However, the relatively low premium volume for the surety line limits the impact on the profit margin for the overall property/casualty industry.
