How Subcontractor Default Insurance & Captives Protect & Empower Contractors
In the high-stakes world of construction, risk isn’t a matter of if, but when. For general contractors, managing that risk, especially when it comes to subcontractor performance, is a constant balancing act. Traditionally, surety bonds have served as a safety net, but a new era of risk management is gaining traction, and it’s rewriting the rules.
In a recent article published by Construction Business Owner, Tim Welles of CIC Services discusses how surety bonds have long been the industry standard for managing subcontractor risk. In the event of a default, a third-party surety steps in, providing a financial backstop. While effective, this method can be slow, rigid, and expensive.
Becoming more popular is Subcontractor Default Insurance (SDI)—a game-changing alternative that’s not only more flexible but potentially more profitable. And when paired with captive insurance, it becomes a powerhouse strategy that forward-thinking contractors are using to gain control, reduce costs, and reinvest in growth.
Instead of relying on an external surety, SDI allows the general contractor to own the policy. This means more control, quicker claims resolution, and broader coverage. If a subcontractor defaults, SDI covers both direct and indirect costs, helping keep projects on track—and budgets intact. Captives allow contractors to retain underwriting profits, build long-term financial reserves, and customize their coverage.
In today’s construction landscape, savvy general contractors are embracing strategies that offer more than just protection—they’re looking for performance, flexibility, and financial gain. SDI, especially when paired with captive insurance, ticks all those boxes.
Read the full article here to see how captive insurance is not just about managing risk anymore. It’s about owning it, controlling it, and even profiting from it.