Reinsurers Absorb Surety Losses as Primaries Hold
Large contractor and project defaults are pushing volatility up to reinsurers even as primary surety carriers report low direct loss ratios.
Updated on Nov. 2, 2026 in Construction
Willis Re reports that US surety reinsurers are absorbing volatility as primary carriers post direct loss ratios that remain low by historical standards. Excess of loss treaties are being hit by large contractor and project defaults ahead of January 1 renewals.
Why it matters
Primary writers have raised their retentions, and the largest losses have been big enough to break through them, shifting volatility upward to reinsurers. Pricing and terms at the January 1, 2027 renewals will reflect this tension across the US construction surety market.
Pine Gate Renewables' November 2025 Chapter 11 filing touched about $1.85 billion of surety bonds and surety-backed letters of credit. Morningstar DBRS estimated the First Brands collapse could cost credit insurers $300 million to $600 million.
The players
Willis Re
The reinsurance broker whose market analysis reports that US surety reinsurers are absorbing volatility as primary carriers post low direct loss ratios.
Morningstar DBRS
The credit rating agency that estimated the First Brands collapse could cost credit insurers between $300 million and $600 million.
The details
Excess of loss structures expose reinsurers to large contractor and project defaults rather than steady attritional profit. Special-purpose vehicles used to finance many data center projects can prevent reinsurers from seeing the tenant or sponsor behind the obligor.
Timeline
September 2025: First Brands collapse.
November 2025: Pine Gate Renewables files for Chapter 11.
January 1, 2027: Reinsurance renewals reflect the current tension.
Market Landscape
Primary surety writers have raised their retentions, so only the largest contractor and project defaults now reach reinsurers' excess of loss treaties. Reinsurers are expected to keep supporting surety, particularly for multi-line clients, but to differentiate harder by cedent.
Pricing increases are expected to be largely confined to programs that have had losses, so cedents without recent defaults may see less pressure. Coface expects US insolvencies to rise around 8% this year, which could affect contractors and project owners who rely on surety bonds.
The takeaway
Surety volatility is moving up the risk chain, so contractors and project owners should expect reinsurers to differentiate more sharply by cedent when terms are set. Watch how the January 1 renewals price programs that have had losses against those that have not.
What happens next
The January 1, 2027 reinsurance renewals are the next scheduled point at which pricing and terms will reflect this tension.
Further reading
Explore more Construction news to see how surety and contractor defaults are shaping the sector.
