Surety Industry Turnaround Continues

Hartford, Conn. - The surety business has recovered from a slump that began with the 2001 recession, according to a new study by Conning Research and Consulting Inc. "The combined ratio climbed more than 40 points and stayed there for the next three years," says Mark Jablonowski, an analyst at Conning, which has headquarters in Hartford. "While the recession and tightening credit resulted in skyrocketing losses, the property-casualty underwriting cycle also contributed to the problem." Those views are examined in a study called "The Surety Market: Taking Care of Business." It's Conning's first analysis of the surety segment, a business the company says has iinfluence well beyond its size because of its importance to construction and regulatory compliance. According to the study, a huge increase in losses during the 2001 to 2003 period wasn't just from claims reported but also from claims that developed badly and a falloff in recoveries and other claims mitigation, says Stephan Christiansen, Conning director of research. The situation turned round in 2004 and 2005, Christiansen observes, adding that 2006 showed continued improvement and the future looks good, too. Capacity is returning to the market but with a renewed appreciation for underwriting discipline, says Christiansen. "That new-found discipline, along with attention to automation and technology [that is]driving cost control," he says, "lead us to a positive forecast for the surety line over the next few years, with premium growing at least as fast as GDP." Source: Conning Research and Consulting Inc.