The complexity of providing Surety Bonds to Public/Private Partnership (P3) projects is similar to the Ying and Yang of nature. Insurance Carriers have a need to provide coverage for a proven construction related project, while understanding the operational piece of that project which, typically is the revenue driver for P3 Consortiums.
Backtrack to Europe in the late 1970’s and 1980’s, when many governments were experiencing high public debt while staring down a gloomy need for infrastructure and public works spending. So they would develop a private finance initiative (PFI). One can arguably track this development to the United Kingdom & Australia in the 1990’s, when the PFI was a way of fusing public projects to private capital, and was largely encouraged.
Some say this was another way of a government getting debt off the Balance Sheet. Many debate the accounting of these principles, but this has become a big market outside the USA.
While P3 results are still open for discussion, consider the current US economic climate: the American Jobs Act of 2011, the ongoing fiscal debt & budget crisis, the need for finding money without raising taxes, and the fact that the USA is about 9% of the worldwide P3 Market. One can say P3’s are not only here to stay but may become a new way governments do business.
In our opinion, the front lines are the best place for the Surety Industry to be in developing a P3 product that will result in better Surety protection for all participants and be on the leading edge of a potential new way of doing business.