The US surety market is working well for primary carriers but much less so for their reinsurers, and that tension will shape the January 1 renewals, according to Willis Re.
In its October market view on credit, surety and political risk, the reinsurance broker said US surety primary carriers continue to post direct loss ratios that remain low by historical standards. Reinsurers have had a different experience. Excess of loss structures expose them less to steady attritional profit, and more to the large contractor and project defaults of the past five to ten years.
Primary writers have raised their retentions, but the largest losses have been big enough to break through them, Willis Re said, so reinsurers have absorbed much of the recent volatility. The broker expects that disconnect to persist while megaprojects, including data centers, concentrate jumbo bond limits on a small number of contractors.
Recent losses show the pattern. The Pine Gate Renewables Chapter 11 filing in November 2025 affected around $1.85 billion of surety bonds and surety-backed letters of credit across several sureties, according to Moody’s.
In trade credit, the biggest test has also been severity. Morningstar DBRS estimated the First Brands collapse in September 2025 could cost credit insurers $300 million to $600 million. Its trade financier, Raistone, is now in Chapter 7 liquidation. Willis Re said fraud and double-pledging, also seen at Tricolor, are as much a due diligence issue as a credit one.
Data centers are the biggest emerging exposure. Alphabet, Amazon, Meta and Microsoft have guided to more than $700 billion of combined capital spending in 2026. The hyperscalers are strong credits, but many projects are financed through special-purpose vehicles (SPVs). That means reinsurers often cannot see the tenant or sponsor behind the obligor. A single project can also appear across credit, surety, property, construction and cyber cover at once.
Willis Re noted that Oracle was cut to BBB- by S&P in July, and that CoreWeave’s credit default swaps traded at distressed levels in mid-October. It said it was not aware of any defaults on data center loans so far.
Willis Re expects reinsurers to keep supporting surety, particularly for multi-line clients, but to differentiate harder by cedent. Price increases will largely be confined to programs that have had losses. Large-loss history, aggregation by principal and the quality of exposure data will matter more than headline loss ratios.
The macro backdrop adds pressure. US 10-year Treasury yields reached 5.31% on October 5, and Coface expects US insolvencies to rise around 8% this year.
For US surety writers, clean loss history and clear contractor aggregation data will be the difference at renewal. Programs hit by large defaults should expect tougher excess of loss terms. With data center construction concentrating large bond limits on a few contractors, reinsurers will want to see exactly who sits behind each exposure.
