Letter from the President

By Matthew J. Rosenberg
President, Rosenberg & Parker

On behalf of everyone at Rosenberg & Parker, we hope that this newsletter finds you well and that you are enjoying more time with your family during these unprecedented times. We launched this brand-new newsletter to bring you educational and informative surety bond topics and industry news that you will not find elsewhere. We will also deliver useful content that we believe will be of interest to you.


In my 30+ years in the surety business, I have seen a few recessions. There was the recession of the early 1990’s spurred on by oil pressures; next was the recession of the early 2000’s as a result of the bursting of the dotcom bubble. This was also around the time of the $750 million Enron surety judgement that involved 12 sureties and their reinsurers. It was the largest historical loss to the surety industry ever.


Then there was the Great Recession. The previous two recessions lasted about 8 months. The Great Recession lasted a year and a half starting at the end of 2007 and was largely attributed to the subprime mortgage crisis that took down the US housing market. Many marquee companies collapsed or needed bailouts, including Fannie Mae, Lehman Brothers, Bear Stern, AIG, as well as most of the auto industry stalwarts.


Now we find ourselves in the Covid-19 Recession brought on by a virus causing a pandemic for which we all await a vaccine and/or therapeutics that will allow us to resume our normal way of life. As of this newsletter, we are over 8 months into this period of distress. Every recession is different. Unfortunately, there are always casualties in business during these economic downturns, but by and large, most companies will survive a recession. Some businesses even come out the other side stronger than they were before. We do know that our economy, as it always does, will bounce back from this latest crisis.


Currently the surety industry globally is approximately a $16 Billion industry. In speaking with surety executives from Great American, Chubb, Euler Hermes, Liberty Mutual, Traveler and others, we find that most of them see a decrease in revenue in the 10-20% range expected for FYE 2020. Construction will be the biggest driver of the slow down. Commercial Surety, which we define as bonds that are not written for construction contractors, will see flat revenues across most companies. We do expect to see increased claims and are beginning to see some surety companies report larger losses. Time will tell if this will be a trend that will increase or flatten out.


As we prepare for the road ahead, we are optimistic about the surety industry and our clients’ ability to weather the current storm. We anticipate some kind of slow down coming in construction in mid-2021, but we expect that the construction economy will rebound from any slowdown in 12-18 months preceding such a downturn. We are already seeing some large construction projects out for bid in the US. We see opportunities in commercial surety for companies that have a solid balance sheet and a good credit rating.


Strong companies will see plenty of capacity in the surety marketplace to satisfy their credit requirements. We expect to see many of these stable companies continue to look for opportunities to replace bank guarantees with surety bonds as they tend to be more cost effective and increase liquidity.


My team and I are always available to answer your surety questions or concerns. In addition, we welcome your comments about our newsletter and its content.


As we approach what will certainly be the most unusual holiday season that is now upon us, I would like to wish each of you health, happiness and good company, even if socially distanced.


Be well,


Matthew J Rosenberg