Federally funded infrastructure projects continue to drive premium growth in the U.S. guaranteed market, with underwriting profits for this line of insurance expected to exceed $2 billion for the third consecutive year by 2024, according to a recent AM Best report.
The ratings agency said federal funding projects tied to the Infrastructure Investment and Jobs Act of 2021 (IIJA) continued to drive public construction spending, with direct premiums rising nearly 10% in the first nine months of 2025 compared with the same period last year.
The report also noted that funding under IIJA will gradually decrease when the law expires in September 2026, which could lead to a slowdown in public spending.
High-tech manufacturing projects, the launch of new data centers and other capital expenditure projects also create opportunities in areas that require covered bonds.
David Blades, associate director at AM Best, said: “As technology becomes more advanced and insurers consider expansion opportunities in emerging risk areas, expansion through other projects is likely to spur future premium growth due to public and private infrastructure plans in the near term.”
AM Best observed that despite relatively stable pricing, guaranteed premiums have risen steadily in recent years, a trend that has continued into 2025.
To date, through the third quarter of 2025, the direct loss rate for the industry’s guaranteed business has declined by more than four percentage points compared with the same period in 2024. With premiums rising and loss ratios falling during the nine-month period, guaranteed insurers’ net profits are likely to rise this year.
AM Best senior financial analyst Robert Valenta said: “The results for the first nine months of 2025 show continued growth and favorable underwriting trends for insurance companies.”
The surety insurance company has maintained underwriting and operating profitability, with net profit margins above 30% each of the past 11 years (2014 to 2024).
By comparison, the insurer’s net profit margin during the same period exceeded that of all other major U.S. commercial insurers. However, the relatively low premium volumes guaranteed limit the impact on profit margins across the property/casualty industry.
