Key Trends Facing the Surety Market in 2025

Now that 2024 has come to a close, many insurance professionals are wondering what trends will shape the surety bond market in the year ahead. With the market on the brink of a dynamic transformation, 2025 promises to bring significant change.

From substantial infrastructure investments to technological breakthroughs, the coming year presents exciting opportunities for surety providers who are proactive in adapting and evolving their businesses to stay ahead of the curve.

So, what’s in store for the surety market in 2025? In this article, we’ll briefly review the outlook for the surety bond market and outline five key trends shaping the surety landscape.

2025 Surety Bond Market Outlook

The surety market saw robust growth in 2024, expanding by 6.8% to reach a market size of $19.62 billion. As we look ahead, the outlook remains strong, with the global surety market projected to grow to around $27 billion by 2030 and North America maintaining 43% of the 2023 market share by region.

Top 5 Surety Market Trends for 2025

With this optimistic market outlook in mind, let’s take a look at five key trends shaping the surety landscape in 2025:

#1 Infrastructure Investments

One of the leading drivers of surety demand in 2024 was an increase in construction activity. This trend will continue into 2025, thanks to the Infrastructure Investment and Jobs Act (IIJA), also known as the Bipartisan Infrastructure Law (BIL).

Signed into law by President Biden in 2021, the IIJA authorized a whopping $1.2 trillion for transportation and infrastructure spending, with $850 billion allocated specifically for projects like roads, bridges, transit systems, and energy infrastructure. So far, this bill has spurred a surge in surety bond demand, particularly in the construction space.

In addition to the IIJA, several other infrastructure investments are bolstering demand for surety bonds, including:

• Inflation Reduction Act (IRA) – Signed into law in 2022, the IRA allocates over $280 billion to support clean energy initiatives, reduce carbon emissions, and boost the energy sector’s resilience.
  
  
• Chips and Science Act (CHIPS Act) – Enacted in 2022, the CHIPS Act dedicates $52 billion to semiconductor manufacturing in the U.S., strengthening the domestic supply chain and providing long-term job creation in the manufacturing and tech sectors.
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• Broadband Equity, Access, and Deployment (BEAD) Program – The BEAD program aims to expand access to high-speed internet to underserved areas across the U.S., allocating $42.5 billion to the initiative. Contractors who work in these remote or rural locations may need surety bonds to guarantee their performance.

Together, these initiatives fuel demand for surety bonds, unlocking significant opportunities across the construction, technology, energy, and telecommunications sectors.

#2 Advancements in Technology

Along with government investments, technological advancements are transforming key aspects of the surety market in 2025. While the surety sector has been slow to adopt new technologies so far, its rate of innovation is expected to accelerate in the coming years.

Some of the top tech trends to watch out for include:

• Digitization – Modern consumers are accustomed to same-day shipping, online food delivery, and real-time lending decisions. As a result, they expect the same speed and efficiency from their surety service providers. To meet these expectations, many surety companies are adopting digital platforms to streamline their bond issuance process.
  
  Along with enhancing speed and efficiency, digitization allows surety providers to spend more time on relationship-driven aspects of their business. For example, by digitizing commercial bond issuance, surety providers can dedicate more time and resources to their contract bond clients.
  
  Strategic outsourcing offers similar benefits, which is why some surety providers are turning to specialized groups for their commercial bonds. A growing number of senior commercial leaders are retiring, leaving their companies with substantial knowledge gaps. Outsourcing is often more cost-effective than attempting to fill these gaps with new, less experienced hires who lack their decades of industry expertise.
  
  
• Big Data – Digital platforms automatically collect and compile vast amounts of data. When analyzed properly, this data can help surety providers identify bottlenecks, optimize their workflows, and hone their competitive edge.
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• Artificial Intelligence (AI) – The University of Texas recently declared 2024 the "Year of AI” due to its growing influence across countless industries. While AI has been advancing for years, it recently reached a tipping point where businesses that fail to adopt it risk falling behind. In the surety industry, AI has the potential to revolutionize underwriting and claims processing. By leveraging AI-powered tools, surety providers can analyze vast amounts of data to assess risks with greater precision, enhancing their decision-making and facilitating faster approvals. AI can also enhance customer service and operations workflows. In 2025, we expect to see AI play a larger role in supporting human underwriters in more efficient processing, from reading large contract documents to flagging odd or adverse language. However, insurance companies must still exercise caution and avoid relying too heavily on AI for underwriting, as various Departments of Insurance have expressed concerns about the potential for unknown biases in AI models.
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• Blockchain Technology – A blockchain is a decentralized digital ledger that securely records transactions between parties in a permanent, verifiable way. While first used as the underlying framework for Bitcoin, this technology has powerful applications for surety bonds.
  
  Surety providers who leverage blockchain technology can secure their bond records in a tamper-proof system, reducing the risk of fraud while enhancing trust and accountability among stakeholders. Although the use of blockchain is still in the early prototype stages, the topic of decentralized, verifiable ledgers will play a greater role in discussions related to preventing surety bond fraud as well as enabling efficiencies between the three parties involved in the surety bond contract.

#3 Rise in Small and Medium-Sized Enterprises

Another trend set to impact the surety market in 2025 is the increasing number of small and medium-sized enterprises (SMEs) entering the construction and infrastructure space. These businesses often require surety bonds to participate in larger public and private projects.

To support their growth, the U.S. Small Business Administration (SBA) recently expanded its Surety Bond Guarantee Program, which provides small businesses with easier access to surety bonds for various types of contracts. Its key changes include an increase in bonding limits for:

• Small Businesses – The SBA has raised the maximum bonding capacity for small businesses from $6.5 million to $9 million for all projects.
  
  
• Federal Contracts – The SBA also raised the bonding limit on federal contracts from $10 million to $14 million.

With these increased bond limits, SMEs can now pursue larger and more complex contracts across the construction, environmental services, and technology infrastructure sectors.

#4 A Shift Toward a Hardening Market

While the surety market has been in a soft cycle with ample reinsurer capacity and relaxed underwriting standards, there are signs that it may be starting to harden. Some of these signs include:

• Ongoing inflationary pressures, which have increased the cost of construction materials and labor, as well as license bond requirements.
  
  
• A rise in the frequency of claims, causing some surety carriers to tighten their underwriting standards and increase their bond premiums.

Given these developments, surety bond providers may become more selective, raising their rates and adjusting their risk management strategies to maintain their profitability.

#5 Rapid Rise of Mega Acquisitions

Along with being the “Year of AI,” 2024 was also a year of “mega acquisitions” in the insurance sector. Several $5 billion-plus insurance broker deals took place in 2024, including the acquisitions of:

• McGriff Insurance Services – Marsh McLennan acquired McGriff Insurance Services for  $7.75 billion in September 2024.
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• Assured Partners – In December 2024, Arthur J. Gallagher & Co. signed an agreement to acquire Assured Partners for $13.45 billion with an expected closing date of Q1 of 2025.
  
  
• NFP – Aon purchased privately held, middle-market insurance broker NFP for $13 billion in April 2024.

As large networks continue to acquire smaller, mom-and-pop agencies, it will be interesting to see if these industry giants maintain their growing market share or fragment under the weight of their large-entity inertia. After all, integrating smaller firms can present considerable challenges, from harmonizing operations to bridging cultural divides.

Supercharge Your Surety Success in 2025

As you can see, the surety market is poised for significant growth and transformation in 2025, thanks to substantial infrastructure investments, technological advancements, and increases in the SBA’s bonding limits. These trends are creating exciting opportunities for surety providers across the United States.

By staying abreast of these trends, surety providers can tailor their strategies accordingly and continue to thrive in 2025.

Sources:

Global Newswire. Surety Market Report 2024 - Key Trends Include the Adoption of Digital Platforms, Advancements in Risk Management Tools, Automated Underwriting Processes and Enhancements in Fraud Detection Technology.

https://www.globenewswire.com/news-release/2024/12/06/2992863/0/en/Surety-Market-Report-2024-Key-Trends-Include-the-Adoption-of-Digital-Platforms-Advancements-in-Risk-Management-Tools-Automated-Underwriting-Processes-and-Enhancements-in-Fraud-Dete.html#:~:text=Dublin%2C%20Dec.,(CAGR)%20of%206.8%25.

WTW. Insurance Marketplace Realities 2024 Spring Update – Surety.

https://www.wtwco.com/en-us/insights/2024/05/insurance-marketplace-realities-2024-spring-update-surety

U.S. Department of Transportation. Bipartisan Infrastructure Law (BIL) / Infrastructure Investment and Jobs Act (IIJA).

https://www.phmsa.dot.gov/legislative-mandates/bipartisan-infrastructure-law-bil-infrastructure-investment-and-jobs-act-iija#:~:text=The%20Infrastructure%20Investment%20and%20Jobs,%22new%22%20investments%20and%20programs.

Congress. H.R. 5376.

https://www.congress.gov/117/bills/hr5376/BILLS-117hr5376enr.pdf

The White House. ACT SHEET: Two Years after the CHIPS and Science Act, Biden-⁠Harris Administration Celebrates Historic Achievements in Bringing Semiconductor Supply Chains Home, Creating Jobs, Supporting Innovation, and Protecting National Security.

https://www.whitehouse.gov/briefing-room/statements-releases/2024/08/09/fact-sheet-two-years-after-the-chips-and-science-act-biden-%E2%81%A0harris-administration-celebrates-historic-achievements-in-bringing-semiconductor-supply-chains-home-creating-jobs-supporting-inn/

Broadband and USA. Broadband Equity Access and Deployment Program.

https://broadbandusa.ntia.doc.gov/funding-programs/broadband-equity-access-and-deployment-bead-program

UT News. UT Designates 2024 ‘The Year of AI’.

https://news.utexas.edu/2024/01/23/ut-designates-2024-the-year-of-ai/

Insurance Journal. AI Revolution in Insurance: Opportunities and Legal Pitfalls.

https://www.insurancejournal.com/magazines/mag-features/2024/11/18/801366.htm

SBA. SBA Announces Statutory Increases for Surety Bond Guarantee Program.

https://www.sba.gov/article/2024/02/26/sba-announces-statutory-increases-surety-bond-guarantee-program

Reuters. Gallagher strikes $13.5 bln deal for Assured Partners to strengthen insurance broker business.

https://www.reuters.com/markets/deals/arthur-j-gallagher-buy-assuredpartners-1345-bln-deal-2024-12-09/

Marsh McLennan. Marsh McLennan to Acquire McGriff Insurance Services.

https://www.marshmclennan.com/news-events/2024/september/marsh-mclennan-to-acquire-mcgriff-insurance-services.html

Arthur J. Gallagher. Arthur J. Gallagher & Co. Signs Agreement to Acquire Assured Partners.

https://investor.ajg.com/news/news-details/2024/Arthur-J.-Gallagher--Co.-Signs-Agreement-to-Acquire-AssuredPartners/default.aspx

Aon. Aon Completes Acquisition Of NFP To Bring More Capability To Clients.

https://aon.mediaroom.com/2024-04-25-Aon-completes-acquisition-of-NFP-to-bring-more-capability-to-clients