Economic Value of Surety Bonds

On May 27, 2025 The Canadian Centre for Economic Analysis (CANCEA) published the results of a study that examined the economic impact of requiring surety bonds on public construction projects across the country. The study emphatically reaffirms the benefits to governments of adopting a mandatory surety requirement on all publicly funded projects and demonstrates that bonds do more than protect taxpayers, small business and workers. They also provide measurable benefits to the national and local economy by protecting GDP, creating jobs, and allowing governments and public agencies to recover some, or all of the premium paid to the surety company.

In fact, these new findings represent an update of an earlier, 2017 study and used data provided by the country’s seven largest surety writers, each of whom conducted a deep dive into their premium and loss data, going back more than 20 years. With this information CANCEA, through the use of its state-of-the-art, agent-based platform known as “Prosperity-at-Risk” was able to examine and measure the direct and indirect impact of surety bonds on key economic indicators as well as the social benefits that come from the protection provided by bonding on public projects.

The results, to say the least, are impressive and once again reinforce the value proposition of calling for surety bonds on publicly funded capital projects. The table below summarizes the key findings for the national study:

Reduced risk of insolvency  A non-bonded construction enterprise is 10 times more likely to become insolvent than bonded companies. 
Protection of economic activity (GDP)

Low-risk scenario: Under a forward-looking scenario of historically low construction insolvencies (status quo risk scenario), performance and payment bonds protect on average $3.85 million of GDP for every $1 million of premium paid on public infrastructure projects.

High-risk scenario: Under the scenario of increased future risk, the relative value of surety bonds is magnified. A return to persistently higher risk when the rate of construction insolvencies were 5 times their current levels, performance and payment bonds protected $27.24 million of GDP for every $1 million in premium paid on public infrastructure projects.
Protection of people’s well- being

Low-risk scenario: Protecting jobs and financial security for employees in the economy helps maintain their well-being resulting in a social value benefit of $1.32 per $1 of premiums paid on public infrastructure projects. 29.4 jobs per $1M of premiums are protected annually.

High-risk scenario: Under the scenario of increased future risk, performance and payment bonds protected well-being resulting in a social value benefit of $9.36 per $1 of premiums paid on public infrastructure projects. 207.6 jobs per $1M of premiums are protected annually.

Fiscally responsible

Recovery of premium

 In the High-risk scenario, governments show a net gain, recovering $3.02 of broader economic tax revenue for every $1 premium spent, while in the status quo case, $0.43 is recovered for every $1 premium spent.
Extent of industry coverage is important The size and significance of the surety bond benefits vary depending upon the level of risk in the economy (e.g., increasing interest rates, debt levels, recession, and global shocks). The highest economic and fiscal benefits versus the premium costs required comes from a policy that requires a combination of performance and payment bonds – with public infrastructure projects bonded.

One key feature of the 2025 update is the inclusion of data that measures the “social value” of bonding, and its impact on the overall well-being of the population. To arrive at these determinations, CANCEA again utilized agent-based modelling. In particular, the use of well-being estimation in economic impact research, which is supported by research in the social sciences, the OECD, and various G20 governments, all of which recognize the validity and reliability of life satisfaction measures in policy-supporting studies.

In addition to the national results, CANCEA has examined the impact of suretyship in the six key regions across the country: Atlantic Canada, Québec, Ontario, Prairies (Manitoba & Saskatchewan), Alberta and British Columbia. The findings for each region are set out in separate reports and infographics which may be downloaded (PDF files) by clicking on the appropriate links below.

Canada

British Columbia

 Alberta

Manitoba and Saskatchewan

Ontario

Quebec

Atlantic Canada

SAC would like to express our profound appreciation to the participating members: Aviva Canada, Liberty Mutual, Intact Surety, Travelers Canada, Trisura Guarantee, Western Surety and Zurich Canada for their efforts and contributions to this study.