Surety Bonding in Ontario - Economic and Social Benefits

The challenge

<div class="elementor-element elementor-align-center elementor-widget elementor-widget-button" data-element_type="widget" data-widget_type="button.default"> <div class="elementor-widget-container"> <div> <p style="text-align: left;">Our analysis shows how the use of surety bonding provides considerable protection and support to Ontario's economy and the well-being of its residents.  In total value terms, the lower end value of the use of performance and payment bonds for public infrastructure projects averages more than a <strong>four-fold payback on the premiums paid for protection</strong>, with 75% representing the avoided economic activity loss and 25% representing protecting the well-being of people who could be affected by construction financial distress and insolvency.</p> <table> <tbody> <tr> <td width="151"><strong>Reduced risk of insolvency</strong></td> <td width="472">A non-bonded construction enterprise is 10 times more likely to become insolvent than bonded companies.</td> </tr> <tr> <td width="151"><strong>Protection of economic activity (GDP)</strong></td> <td width="472"><strong>Low-risk scenario:</strong> Under a forward-looking scenario of historically low construction insolvencies (status quo risk scenario), performance and payment bonds protect on average <strong>$3.75 million of GDP for every $1 million</strong> of premium paid on public infrastructure projects. <strong>High-risk scenario:</strong> 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 <strong>$26.75 million of GDP for every $1 million</strong> in premium paid on public infrastructure projects.</td> </tr> <tr> <td width="151"><strong>Protection of people’s well-being</strong></td> <td width="472"><strong>Low-risk scenario:</strong> Protecting jobs and financial security for employees in the economy helps maintain their well-being resulting in a social value benefit of <strong>$1.26 per $1 of premiums</strong> paid on public infrastructure projects. 27.5 jobs per $1M of premiums are protected annually. <strong>High-risk scenario:</strong> Under the scenario of increased future risk, performance and payment bonds protected well-being resulting in a social value benefit of <strong>$8.99 per $1 of premiums</strong> paid on public infrastructure projects. 196.4 jobs per $1M of premiums are protected annually.</td> </tr> <tr> <td width="151"><strong>Fiscally responsible</strong></td> <td width="472">In the <strong>High-risk scenario, </strong>governments show a net gain, protecting $2.99 of broader economic tax revenue for every $1 premium spent, while in the status quo case, $0.42 is protected for every $1 premium spent.</td> </tr> <tr> <td width="151"><strong>Extent of industry coverage is important</strong></td> <td width="472">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 <strong>performance and payment bonds – with public infrastructure projects bonded.</strong></td> </tr> </tbody> </table> </div> <div class="elementor-button-wrapper"><a class="elementor-button elementor-button-link elementor-size-sm" href="https://www.cancea.ca/wp-content/uploads/2025/08/Surety-Bonding-in-Ontario-2025-Report.pdf"><span class="elementor-button-content-wrapper"><span class="elementor-button-text">Download the Full Report</span></span></a></div> </div> </div>

Key results