Surety bonds play a critical role in today’s construction and business landscape — but what’s changing, and how can contractors stay ahead? David Pesce, Head of Surety at Munich Re Specialty – North America, offers expert insights on industry trends, strategies to boost bonding capacity, and why surety is emerging as an exciting career path for future talent.

What should everyone know about surety bonding in the current environment?

One thing everyone should know is that the industry has made bonding far more available than in the past, especially for businesses looking to get their first bonds. A great initiative by the National Association of Surety Bond Producers and the Surety & Fidelity Association of America is the Contractor Bonding Education and Mentoring Program for new and emerging contractors. This is a free online, on-demand program that’s available 24/7 to help contractors, and it has an option to work with professionals in the surety industry to provide practical advice on obtaining bonds. I wish more people knew about it because it could really give them the education they need to get that first bond.

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

Contractors that want to get more bonding capacity can do several things, and a good place to start is to prepare now — don’t wait until the last minute when a bond is needed. Begin communicating early with your surety bond producer and share information. A second piece of advice is to have a well-founded and well-written business plan. Prepare a business plan that addresses all the concerns any other business partner might have about your company. That would include details on your staffing, the location of projects, and financial projections.

What things about surety keep you up at night?

Something that is an ongoing challenge is the continued increase in private equity involvement with companies that need surety. Many private equity firms tend to ignore surety during due diligence or believe they can work around surety in an attractive deal. A big challenge is that debt and leverage on a construction business’s balance sheet change the company’s credit profile and cash flow, which can make bonding difficult. One solution is to involve surety professionals at deal inception, rather than later on, when the deal is already done.

What is your company doing to promote surety as a career?

Munich Re Specialty has a robust summer internship program across all our lines of business, including surety. Often those interns receive job offers and become trainees. We’re developing a pilot program for students straight out of college to become surety trainees and underwriters. In addition, our company considers it important to support the career programs of NASBP and SFAA. Surety is a great career for talent that was otherwise interested in working on Wall Street. Surety combines skills that are close to investment banking: financial analysis, knowledge of business and law, and creating deals.