March 2025

Outdated processes and regulatory confusion are slowing down Canada’s surety industry just as infrastructure investments and complex projects ramp up By Chris Davis As Canada increases infrastructure spending, the industry should consider integrating AI-assisted surety practices to keep pace. Outdated bonding processes threaten project delays, forcing contractors and underwriters to adapt or risk falling behind.   With digitization and regulatory shifts accelerating, Dustin SanVido (pictured), a senior account executive at AI Insurance, has seen how the industry evolves. His message to skeptics and traditionalists? Stop blaming AI and embrace it.    A key example of this is how electronic authentication tools like DocuSign have virtually eliminated the need for paper bonds. This transformation has done more than speed things up. Processes are smoother, there are fewer errors, and transactions move faster.  “It’s scarce that you run into a municipality or a township still looking for that paper. We’ve completely adapted on the construction side,” SanVido said. “The industry is very happy, and we’re all making more money. At the end of the day, that’s what surety is here to do—to make the contractors money.”  Regulatory Shifts Are Reshaping the Industry  Beyond digital transformation, regulatory changes are also reshaping the surety landscape. The global surety market was valued at $18.19 billion in 2023, with revenue expected to grow to $27 billion by 2030, driven by evolving regulations and increased infrastructure investments.  One notable development is Ontario’s new Planning Act, which came into effect in late 2024. Under the old system, developers used irrevocable letters of credit and other direct collateralization methods with these owners requiring security—none truly protected their investment when developers were brought onto a project. The new framework changes that.  “This instrument is considered on-demand and provides similar security as an irrevocable letter of credit (ILOC)”, SanVido said. “Right in the bond framework, claimant places a default claim, and surety has 15 days to pay. This allows the contractor/developer to deploy capital elsewhere as opposed to tying up in a bank for an indeterminate amount of time.”  This fast-tracked claim process is great for developers but has made underwriters more cautious. “Bonding companies are more conservative in their underwriting because they won’t apply the same underwriting metrics, they would to a traditional contractor because of that claim trigger,” he said. But the rollout has been chaotic. The result? It was a slow and muddied transition. “There isn’t an agreed-upon framework in the wording itself,” SanVido said. “So, from township to township, city to municipality, no one uses the same framework yet. It’s a wait-and-see approach right now. The sureties will, long term, agree to a single common form, and it’s learning as we go.” Risk Assessment Is No Longer Just About the Three C’s For decades, underwriting in surety has been built on the “three C’s”: capital, character, and capacity. Capital measures financial strength. Character assesses organizational stability. Capacity ensures the contractor can handle the job. But now, two more C’s have entered the equation: cash management and communication. “Cash management has become a large concern with underwriters,” SanVido said. “They’re not just looking at whether there is money but how it’s being managed—shareholder loans, cash and debt balances, working capital efficiency.” Communication is just as crucial, as underwriters now factor in how responsive and engaged a contractor is. “We are in the age of AI; we’re in the age of remote work. Communication is becoming so much more important—promptness, accountability, transparency, availability,” SanVido said.” If you’re someone who’s quick to provide the information, if you’re open and spending the time learning and developing that relationship, it’s become such an important factor.” Estate bonds: Myths, costs, and the fight for awareness Beyond contract surety, fiduciary bonds play a critical role in estate administration, yet many misunderstand their necessity and function. Executors and administrators often assume that only large estates require bonding, leading to confusion about legal triggers and financial responsibilities. “I have requests where it is down to a $1,000 estate, $5,000 estates,” he said. “The triggers are in place; the legislation currently is still what it is.” Cost is another major misconception. Many believe estate bonds are prohibitively expensive, deterring executors from exploring their options. “When you get into seven-figure and eight-figure estates, that number can grow,” SanVido said. “Even at rates that are universally under 1%, those become big numbers, and that can be discouraging for people.” However, the biggest challenge isn’t cost—it’s awareness. Some professionals in the legal field don’t even realize when estate bonds are required, creating gaps in estate planning and administration. “It’s 2025, and I’m the only specialist out there who’s consistently teaching law firms, consistently trying to speak at Association events and educate them on the whole,” he said. Lawyers themselves often don’t understand estate bonding nuance, SanVido said. “The first conversation I have with a lawyer is, ‘I’ve practiced law for 30 years. I’ve never needed one of these things. How do we do this?’ That is the most common question I receive in the legal profession in Canada,” he said. To change that, he’s pushing education—seminars, webinars, conference presentations. He highlights how surety professionals need to reconsider how we provide typical bonding solutions to our product industries. The future: AI and specialized bonds are taking over Two forces are reshaping the future of surety: artificial intelligence and the rise of specialized bond instruments. But can AI truly replace human underwriters? SanVido is skeptical. “AI is coming; it’s already here in the United States surety market, and it’s only a matter of time before it’s adapted in Canada,” he said. “I think AI is accurate for tangible underwriting and administration. I think it’s great for suitable analytics and automating workflow processes. But I don’t believe that it can assess the character of an organization.” Surety relies on trust, relationships, and gut instinct. “I don’t think there’s a way that AI can currently replicate that,” SanVido said. At the same time, specialized bonds are gaining traction, as is the need for subcontractor bonding programs and mid-tier

WASHINGTON, DC / ACCESS Newswire / March 3, 2025 / The Surety & Fidelity Association of America (SFAA) and the National Association of Surety Bond Producers (NASBP) led a Legislative Fly-In with members from across the industry to educate Congress on the value of construction surety bonds and advocate for key legislative priorities. These important meetings with policymakers focused on expanding support for the bipartisan Water Infrastructure Subcontractor and Taxpayer Protection Act (S.570 / H.R.1285), which would strengthen the Water Infrastructure Subcontractor Finance & Innovation Act (WIFIA) program by requiring appropriate bonding for all projects, including public-private partnerships (P3s). This bipartisan legislation was introduced by Senators Mark Kelly (D-AZ) and Kevin Cramer (R-ND) and Representatives Mike Bost (R-IL) and Chris Pappas (D-NH) on February 13 of this year. Surety professionals held over 135 meetings with policymakers and staff to emphasize the significant savings that surety bonding provides to taxpayers across the country. Using data from the Ernst & Young (EY) study, The Economic Benefits of Surety Bonds, industry leaders reinforced that surety bonds safeguard taxpayer dollars, ensure project completion, protect subcontractors, suppliers and workers, and drive economic growth. “SFAA members engaging with federal policymakers is a vital part of our advocacy mission, ensuring Congress understands the essential role of surety bonds in supporting and safeguarding public infrastructure projects,” said Ryan Work, President and CEO of SFAA. “Working with our industry partner, NASBP, our critical engagement with Congress strengthens and engages members on key issues affecting our industry.” “The needs of the Nation’s critical infrastructure are readily apparent, and surety bonds guarantee that these projects will be delivered, protecting the investments of taxpayers,” commented Mark McCallum, CEO of NASBP. “The story of surety’s benefits is compelling and one that each new Congress must understand as it legislates for the country’s advancement. My thanks to all those surety professionals who took the time to tell the story to their members of Congress,” McCallum added. During these joint meetings, industry leaders emphasized the critical role of surety bonding in federal infrastructure projects. Discussions included the importance of bonding requirements for WIFIA, ongoing P3 projects, the Broadband Equity, Access, and Deployment (BEAD) program, and other initiatives supporting the nation’s infrastructure. NASBP and SFAA also hosted a special event featuring insights from former Congressman and U.S. Transportation Secretary Ray LaHood and a panel discussion with Jack Ruddy, the Majority Staff Director of the U.S. House of Representatives Transportation & Infrastructure Committee. SFAA and NASBP look forward to our continuing dialogue with Congress, the Administration, and Federal Agencies to advance key priorities that support projects across the country. To read the EY report and get additional information on the value of surety, visit www.surety.org/suretyprotects. The Surety & Fidelity Association of America (SFAA) is a nonprofit, nonpartisan trade association representing all segments of the surety and fidelity industry. Based in Washington, D.C., SFAA works to promote the value of surety and fidelity bonding by proactively advocating on behalf of its members and stakeholders. The association’s more than 425 member companies write 98 percent of surety and fidelity bonds in the U.S. For more information visit www.surety.org. https://www.accessnewswire.com/newsroom/en/government/surety-industry-unites-on-capitol-hill-to-advocate-for-key-legislative-priorities-994562

CHICAGO — PMC Casualty Corp. argues that an Illinois federal judge properly denied Virginia Surety Company Inc.’s motion to dismiss a lawsuit accusing it of failing to remit $20 million allegedly owed under a vehicle service contract reinsurance agreement. In a Feb. 25 opposition filed before Judge Matthew Kennelly of the U.S. District Court for the Northern District of Illinois, PMC says Virginia Surety does not identify a legitimate basis for reconsideration by establishing either a “manifest error” in the opinion or newly discovered evidence. https://www.harrismartin.com/publications/14/reinsurance/articles/54520/reinsurer-says-judge-properly-refused-to-dismiss-vehicle-service-contract-case