10 Bright Spots for Surety in 2009

March 12, 2009

Ready for some good news for surety? Look into our crystal ball... 

Since we all hear the bad news about the economy being pumped out daily in the media, and we’ve heard what the economists are predicting, the Leaderboard editors thought it would be refreshing to provide some good news.

We asked some Leaderboard Agents, as well as our own underwriters to check their CRYSTAL BALL and come up with the following 10 bright spots for surety in the coming year.

1. We’ll begin with Merchants Assistant Vice President of Underwriting Steve Dorenkamp, because this article was his idea.
“My bright spot comes from an Agent in the Mid-Atlantic United States,” says Steve. “Construction in the area has slowed down and is not recession proof, but there are several positives happening in the area: The new administration is coming to town and bringing 10,000 to 15,000 new people. While there will be people leaving, this change will create opportunities for the construction industry. The federal government is spending significant dollars on the military bases from Maryland through Virginia. This includes new construction and remodeling work. The new Walter Reed Hospital has created development opportunities. The federal government is building a new $600,000,000 research facility. The Mid-Atlantic region is doing well compared to other pockets of the U.S.  Many see there is enough work available to keep a positive attitude.” 

Steve Dorenkamp • Merchants Bonding Company • Des Moines, Iowa

2. Our second bright spot comes from Phoenix, Arizona and the Minard- Ames Agency. We thank Debby Anderson for her inspired decision to provide two bright spots!

“One bright spot in Arizona...just one?
1. We have a belt and it can be tightened. Despite what is currently happening all around us, many contractors in Arizona have enjoyed several very strong years and been able to position themselves to ride out the storm. 
2.  The first half of 2009 brings the desert sun up in the east with a more tempered feel. We have several months ahead where we’ll walk around with a grin on our face, thankful that we are here!”

Debby Anderson • Minard-Ames Insurance Services • Phoenix, Arizona

3.  Phil Tobey at the Dale Group in New Jersey has number three and it is great news from cities in the “Garden State.”
“I serve on my township council, and the nice thing for surety in New Jersey is there are so many municipalities. Other states have large rural areas, but New Jersey does not, and it always seems to stay pretty busy.” 

Phil Tobey • The Dale Group • Florham Park, New Jersey     

4. From Ohio we get a positive spin on something the surety industry has seen as a negative, thanks to Scott Liptak of Drengler, Liptak and Associates.
“We’ve all discussed the problem: Too many private sector contractors flooding the public sector marketplace, and every job seeing 15-20 bidders, with the low bid going to the contractor that is most desperate for work (or the contractor that makes the biggest mistake). The better managed and better capitalized contractors will see less low bids in this sort of environment….but… On a positive note, for a professional surety agent, this sort of environment is a perfect opportunity to write new accounts. Within the next several months, I expect to see significant tightening of surety underwriting requirements, which will highlight the shortcomings of the many insurance agents who “dabble” in surety-ship. When times are good, an insurance “generalist” can obtain surety bonds.   When times are tough (as they are now), the critical role of a professional surety “specialist” becomes more apparent to contractors. Thus, we look to grow our client base in the coming year. And while written premium is not expected to increase in 2009, today’s production efforts will be rewarded in 2010 and beyond.”

Scott Liptak • Drengler, Liptak & Associates • Stow, Ohio

5.  Bright spot number 5 comes from Florida and Susan Reich of Florida Surety Bonds. Her view is also one that shines light well into the future for surety.
“The one big bright spot I see in Florida is that the banks that waived bond requirements during the good times have seen some losses and learned a valuable lesson about the importance of bonding. That lesson will not soon be forgotten and will advance the surety industry in Florida for many years to come.” 

Susan Reich • Florida Surety Bonds • Altamonte Springs, Florida

6.  The economy has new accounts cropping up for Shorewest Surety Services in Wisconsin, according to  Tom Chambers.
“In Wisconsin, we are seeing many new opportunities based on bond back requirements from general contractors. Some of the large general contractors that had been using an alternative insurance product instead of surety bonds for their subs, are now requiring bonds instead. We wrote a new account with Merchants last week that is a subcontractor to a Chicago general contractor now requiring a bond.”

Tom Chambers • Shorewest Surety Services • Caledonia, Wisconsin

7. From Texas, renewable energy is a positive focal point, and Corey Bentley offers several other bright spots to also consider.
“Wind Energy – construction for renewable energy has increased each year and we only see this sector of construction continuing to increase and grow throughout the State of Texas. Also, rural school districts are spending money on new school facilities and renovations. There are also more frequent sub bonds - GCs are beginning to see the true value in sub bonds. Owners, GCs and subs are all being provided the opportunity to work on better projects with better contractors due to the subs ability to bond back.

Corey Bentley • Upshaw Insurance • Amarillo, Texas

8.   The next two bright spots come from the heart of Iowa and Lamair-Mulock-Condon.
“The obvious ‘bright spot’ is the federal government’s proposed stimulus package which includes new spending for infrastructure as one of its key components. We in the Midwest have not experienced the effects of the economic downturn to the extend it is felt on the east and west coasts,” says Mark Keairnes.

Mark Keairnes • Lamair-Mulock-Condon • Des Moines, Iowa

9. And Joe Schmit from Lamair offers this positive twist: “I can say that in more difficult economic times, our clients will rely more and more on our expertise as well as the consistent marketplace that the public sector will provide.”

Joe Schmit • Lamair-Mulock-Condon • Des Moines, Iowa

10.  Associated General Contractors Chief Economist Ken Simonson offered some exciting possibilities for the industry:
“On January 15, the House Democratic Leadership announced details of the American Recovery and Reinvestment Act. Details of the $825 billion package were released by the House Appropriations and Ways and Means Committees. The total package consists of $275 billion in economic recovery tax cuts and $550 billion in targeted investments, coupled with several unprecedented accountability measures. AGC estimates that approximately $150 billion of the spending proposed in this bill would benefit the construction industry.”

Ken Simonson • Associated General Contractors • Washington, D.C.