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Surety industry insights with David Pesce
Munich Re Specialty Insurance's Head of Surety David Pesce shares his insights on the surety market.
Surety industry insights with David Pesce
© Paul Bradbury / Getty Images

What advice do you have for contractors who seek to increase their bonding capacity?

Contractors should communicate this desire as early as possible to all involved with their surety relationship. This allows time for the parties to thoroughly review the information, ask the necessary questions, and make informed decisions before the increase is needed to avoid the pitfalls of a last-minute ask. Contractors should also prepare a detailed business plan that demonstrates how the bonding capacity increase will be handled operationally, as well as their full financial projections showing its impact on the balance sheet, P/L, and cash flows.

It’s important to seek assistance and counsel from as many qualified people as possible in making the decision to increase bonding capacity. Your CPA, attorney, and other experienced colleagues will have insights and advice that will be valuable in formulating your plans.

Do you anticipate an increase in bond claims activity in 2024? What should a potential claimant know about the surety claims process?

Munich Re is already seeing and hearing of increases in claims activity in 2023, with an expectation of it continuing into 2024. The most recent SFAA results clearly show an uptick in surety claims. Further, there is anecdotal evidence from the noticeable increase in the number of published articles and online content referencing a defaulted contractor and the surety stepping in to complete the project and protect the owner from financial impact. Frequency of claims also appears to be increasing, and we are now hearing of an increase in severity from some of the leading reinsurers in the market. 

Leading economic indicators signaling some version of a recession, a noticeable slowdown in private construction due to the interest rate environment, continued labor issues, and an increase in corporate bankruptcies indicate more claims activity in the near future.

David Pesce, CCIFP
Today’s surety industry offers many career tracks that can fulfill the career interests of young professionals even as they evolve through their early stages.
David Pesce
Head of Surety
Munich Re Specialty Insurance

Why should surety be a preferred career choice or direction for a college graduate or a young business professional?

Today’s surety industry offers many career tracks that can fulfill the career interests of young professionals even as they evolve through their early stages. Our industry involves in-depth financial and credit analysis, along with deep risk analysis on the underwriting side. We touch aspects of nearly every industry and continue to innovate and adapt as new markets arise. Surety offers opportunities on the operations side of the business for workflow improvements, IT careers that involve systems integration, and emerging AI prospects. Finally, it has numerous opportunities in the claims area for claims handling, legal work, engineering, and consulting. Surety is a leader in diversity, equity, and inclusion initiatives and continues to seek ways to ensure that it remains in this position, offering long-term opportunities for all.

This was originally published in Surety Bond Quarterly Annual 2023.
About Munich Re Specialty Insurance
Munich Re Specialty Insurance (MRSI) is a description for the insurance business operations of affiliated companies in the Munich Re Group that share a common directive to offer and deliver specialty property and casualty insurance products and services in North America.
For more information on MRSI, including licensing, regulatory-required, and other information on the operating companies, please click here.

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David Pesce
David Pesce, CCIFP
Head of Surety
Munich Re Specialty Insurance

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