The Canadian surety industry welcomed 2019 like a breath of fresh air following a disastrous 2018—its worst year on record. Losses stemming from the large contractor defaults of 2018 have now largely been digested by the primary sureties involved, and re-insurance interest in Canada remains high with few rare exceptions.  

At the time of writing, the Office of the Superintendent of Financial Institutions (OSFI) has posted third-quarter results. These show premiums in 2019 are up 10 percent over the same period last year and the loss ratio is down to 17 percent. This is compared to a loss ratio in excess of 100 percent at 2018 year end. Given the year-over-year rebound, many sureties are upbeat about prospects for 2020—although chatter continues about a rise in the frequency of claims and disputes. Keep an eye out for OSFI’s posting of the final surety industry results for 2019 in the spring. 

Perhaps the biggest news in surety in 2019 was the acquisition of The Guarantee Company of North America, formerly the oldest bonding company in Canada, by Intact. By volume the sale combines two of the top writers of surety in the country. The impact of the sale will be a story worth following closely in 2020.   

This past year also saw new entrants to the Canadian marketplace in the form of both US-based sureties and multinational reinsurers who have opened primary surety writing departments. Contrary to the insurance industry which is in a hard market, the surety market remains extremely competitive, particularly in the small to mid-market space (i.e., contractors under $100 million in annual sales).  

As prompt payment begins to take grip across the country, contractors are reminded that those who manage their companies well and avoid adjudication and disputes will be looked at more favourably by their surety partners. Be selective and underwrite all of your partners: your success is impacted by the parties you work for, and the trades and suppliers you select, and the business advisors (including your bond and insurance broker) you surround yourself with.   

This article was written by Tim Gorman and Collingwood Brown. Both are partners in the surety bond department at Petrela, Winter & Associates (PWA). PWA are bond and insurance brokers specializing exclusively in the construction industry. They can be reached at 416 488-2522.