21 July 2023
Surety Market Update
Q3 2023
Given the administrations we have seen in the Construction sector in recent months we are finding in the Surety Market that there is a larger requirement for a contractor to supply bonds on their projects.
When we look at the reasons behind these companies going into administration, ultimately there is one reason which binds them all – a lack of liquidity. This could be the result of poor risk management, one or two problem contracts, the increased costs of materials and labour, or potentially a combination of all of these which result in a ‘perfect storm’.
The key for contractors is to look after their cash and access to working capital.
Utilising the Surety Market
Utilising the Surety Market for bonds instead of a bank can help in this regard. A surety bond is an advantageous tool for construction contractors as bonds being provided by insurance companies will have no effect on the balance sheet of a business, unlike using a bank for bonds which ties up working capital. Banks will often be fully secured with cash and charges over assets, which is unattractive at a time where liquidity is key to a business.
Sourcing bonds through the Surety Market will also allow more flexible options on bond wordings, whilst also spreading out the liability as we as the broker can look to set up facilities tailored to bonding requirements. We are specialists in our field, so you can be confident that we can help you with your needs. As your need for bonds increases it is critical to utilise the services of a specialist broker to access the entire surety market to ensure the necessary capacity is available.
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Arthur J. Gallagher (UK) Limited is authorised and regulated by the Financial Conduct Authority. Registered Office: The Walbrook Building, 25 Walbrook, London EC4N 8AW. Registered in England and Wales. Company Number: 119013.