This article was republished with permission from Risk & Insurance.
April 19, 2021
By Mark Farina, Senior Vice President, Global Chief Underwriting Officer, Argo Surety
Natural events are often the cause of losses for other areas of the insurance industry, but in the surety market, economic crises are the culprit. We’re paying close attention to how the Biden administration responds to the economic impact of the COVID-19 pandemic, infrastructure priorities, revised tax policies and how a historic climate agenda will affect the energy and mining sectors, as well as overall economic outlooks.
Infrastructure investment brings optimism to construction
The surety marketplace overall is a 60/40 split in premiums from the construction and commercial sectors – both of which have slowed during the struggling economy caused by the COVID-19 pandemic.
Nearly every new administration promises an economic boost through infrastructure investments, but often they face an opposition Congress. Given current Democratic control of both houses, we expect Biden administration infrastructure priorities to move through the legislative process with fewer restrictions. The more infrastructure projects that are out there, the more bonding they will need – and surety providers must be prepared to handle the influx of business as it gets moving.
The Surety & Fidelity Association of America partnered with S&P Global to highlight the benefits of infrastructure investments. They estimate that a $2.1 trillion infrastructure investment would result in a $5.7 trillion boost in overall economic activity in the U.S. over a 10-year period and add more than 2.3 million jobs by 2024.
Additionally, if the new administration succeeds in its efforts toward providing additional access to COVID-19 vaccinations and relief packages, there will be a direct impact on the economy that creates a positive industry outlook. Argo Surety writes bonds for cruise liners, for example – an industry we expect will take off again as people begin to feel it is safe to travel.