5 Key Changes in Surety Bond Underwriting: What Contractors Must Know
Surety bond underwriting criteria across the UK construction sector are tightening in response to rising contractor insolvencies.
Fueled by fluctuating material costs, weak supply chains, and increasing employer expectations, surety providers have to adapt. This reassessment of risk evaluation is causing a noticeable shift in the availability, structure and cost of construction bonds.
For contractors, brokers and employers, understanding these changes is essential. The right preparation can protect bonding capacity, support access to larger projects, and help ensure that performance bond requirements remain achievable, despite the tougher market.
This blog outlines the five biggest changes shaping surety bond underwriting today, and the practical steps contractors can take to strengthen their applications…
1. More Rigorous Financial Analysis
Financial stability has always been a core part of underwriting, but the level of scrutiny has increased significantly. Surety providers are focusing on the fundamentals that best reflect a contractor’s real-world resilience.
Underwriters are placing greater emphasis on:
- Working capital, as well as net assets
- Cash conversion patterns, particularly on long-running frameworks
- Pipeline quality, including the balance of risk across current projects
- Debt exposure, secured lending arrangements and interest liabilities
- Retained earnings as evidence of long-term financial discipline
Contractors with strong top-line revenue but weak liquidity are now treated as higher risk. This is leading to more questions, requests for interim accounts and, in some cases, reduced bonding capacity.
2. Tighter Assessment of Project Risk
Surety bond underwriting criteria increasingly integrate project-specific risk assessment. Even financially strong contractors may face additional hurdles if tendering for large or complex projects.
Underwriters are looking closely at:
- Project size relative to balance sheet strength
- Contract type (such as fixed-price vs. cost-plus)
- Payment schedules and anticipated cashflow timing
- Supply chain structure and subcontractor exposure
- Quality of programme planning and risk mitigation
It’s important to remember that the alignment between project size and corporate financial capability is now a defining underwriting factor.
This shift is especially relevant for contractors exploring how to get a surety bond in the UK for higher-value projects.
3. Reduced Market Capacity and Appetite
UK surety providers are beginning to adopt a more conservative stance. While this doesn’t mean the market is closed, it does indicate capacity is being reallocated toward contractors with consistently strong underwriting profiles.
Signs of tightening capacity include:
- Lower single-project limits for some contractors
- More selective approvals for developers or heavily leveraged projects
- Reduced willingness to support contractors with rapid, unstructured growth
- Greater caution around sectors experiencing high insolvency activity
This recalibration of bonding capacity in UK construction is driven partly by increased claims exposure and partly by broader market uncertainty.
Contractors who previously secured bonds quickly may now experience longer assessment periods or stricter conditions.
4. More Onerous Bond Wordings and Employer Requirements
Performance bond requirements in the UK are evolving, and as such, public-sector bodies and large private developers are increasingly seeking broader protection.
Common trends include:
- More prescriptive bond wordings
- Increased clarity around default triggers
- Shortened investigation periods
- Requests for partial on-demand features
- Additional reporting obligations for contractors
While underwriters must ensure that bond wordings reflect fair and insurable risk, where employers insist on more onerous terms, contractors may face additional underwriting scrutiny or higher premium levels.
5. Collateral and Indemnity Becoming More Common
Market conditions are making the requirement for collateral a more frequent underwriting tool, particularly for contractors operating at the edge of their bond capacity.
Situations where collateral may now be requested:
- New contractors with limited trading history
- Businesses with declining liquidity or thin working capital
- Large one-off projects that exceed typical annual limits
- Instances of inconsistent financial disclosure
- Emerging sectors where claims histories are limited
Examples of acceptable collateral may include cash deposits or letters of credit. While not the market norm, contractors should expect a higher likelihood of such requests in the coming years in response to this rise in instability.
How Contractors Can Strengthen Their Position
Even in a tightening market, contractors can take practical steps to improve their underwriting outcomes and secure the bonding support they need.
1. Prepare strong financial information
High-quality, timely financial statements significantly improve underwriting confidence.
2. Demonstrate a sustainable growth model
Sureties favour contractors who expand steadily, with appropriate controls and working capital support.
3. Improve project governance
Clear programme management, realistic forecasting and robust risk controls reduce perceived project risk.
4. Strengthen supply chain arrangements
Underwriters want to see that subcontractor default, price volatility and labour shortages are actively managed.
5. Engage early with specialist brokers
Early discussions support smoother underwriting, especially for larger or more complex tenders.
Surety Bonds and Performance Bond Support from CG Bonds
If you’re applying for your first surety bond or reviewing your upcoming tender requirements, CG Bonds is here to support you.
Why Contractors Choose CG Bonds
- Exclusive access to a UK underwriting panel
- A fast, streamlined application process
- Dedicated account managers who understand construction
- Guidance on bond wordings and employer requirements
- Reliable support for contractors at every stage of growth
