2023 Midyear Bonding Update

Salt Lake City, Utah

Midway through 2023, the surety industry still has excess capacity; however, having enough labor to do the work is creating problems for general contractors trying to stay on schedule.

Owners are not being as forgiving or as easy to work with as they were during the recession. Even though some materials are still challenging to procure, for the most part, getting materials isn’t the issue—it’s cost and then the labor necessary to do the work.

Surety companies are beginning to underwrite, dotting those I’s and crossing those T’s in more detail. The PPP money is wearing out, or for many trades, is gone. With the increased cost in labor, insurance and supply costs have increased, beginning a deterioration of margins. This could be problematic and lead to an uptick in surety claims—if these costs aren’t closely managed to identify slippage early on, leading to corrective action.

Surety companies have consolidated with other companies. This is also contributing to additional capacity and, frankly, quicker access to programs with higher limits. This is a positive for the contractor and will likely continue as long as the reinsurance carriers continue to push capacity into the carriers.

The federal and state governments continue to push more money in and out of our wonderful state of Utah. If we want to continue to grow our economy, we need to improve our transit as well as the amount of housing, WWTP, and storage projects to sustain our cities. This is especially important for those cities that have experienced explosive growth since the pandemic. We need to continue to put in the infrastructure.

Overall, the news is positive. The challenges are there but nothing that can’t be worked through. We are fortunate to live where we do in a state that continues to be run how it is and continues to show growth in almost all segments.

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