By Edwin Little, Surety Business Development Specialist, Ai Insurance Organization May 4, 2026
Your bonding facility is probably sized against your 2024 financials. On January 1, 2026, three amendments to Ontario’s Construction Act came into force that change the math on capacity. If your broker has not run a refresh against the new rules, you are likely bidding under your real ceiling and paying a higher rate than you should.
This post breaks down what changed, what it means for your facility, and what the contractors who get capacity increases this year are doing differently.
TL;DR
| Change | Effective | Direct impact on your facility |
| Adjudication now reaches L&M bond disputes | Jan 1, 2026 | Capacity recycles in weeks, not 12 to 24 months. Sub file discipline scrutinized harder. |
| Annual holdback release on multi-year jobs | Jan 1, 2026 | Working capital improves at predictable annual points. Build into your renewal forecast. |
| Invoices deemed proper after 7 days | Jan 1, 2026 | AR aging tightens. WIP underbillings drop. Current ratio improves. |
All three changes point the same direction: faster cash, faster capacity recycling, and a higher bar on file discipline.
Change 1. Adjudication now reaches surety disputes on L&M bonds
Adjudication started as a prompt-payment tool between owners and contractors. Under the 2026 amendments, it extends to disputes between principals and sureties on labour and material payment bonds in certain circumstances.
What that means in plain English: an L&M claim that used to take 12 to 24 months to resolve through litigation can now be addressed inside weeks. The capacity tied up during that fight gets freed up faster.
The reverse is also true. Weak L&M file management gets tested in front of an adjudicator quickly. Carriers know this. They will look harder at how you and your subs manage L&M claims because their exposure window just shrunk.
What to do before your next renewal:
- Tighten sub-vetting. Get current financials and a CCDC 11 on every sub above your materiality threshold.
- Document sub payment timing. A clean payment ledger is worth a quarter point on your rate.
- Build an L&M response SOP. Who answers the claim notice, in what window, with what supporting docs.
Change 2. Annual holdback release on multi-year projects
Owners must now release accrued holdback on an annual basis on projects that span more than a year. No deduction. No set-off. No withholding.
For a mid-market contractor running two or three multi-year jobs concurrently, this is a material working-capital event. Cash you used to wait on for the full project term is now released on a predictable annual cadence.
Your underwriter cares about working capital because it is the single biggest input into bonding capacity. If your broker is presenting your renewal off your old financials without the new holdback timing built in, you are getting underwritten on a worse balance sheet than you actually have.
What to put in your renewal submission:
- A schedule of multi-year jobs with annual holdback release dates calculated.
- Forecast cash flow showing the timing impact on working capital across the next 12 months.
- A working capital ratio that reflects the new release cadence.
Two pages. Every change. Every underwriting impact.
Download the Ontario Construction Act 2026 Bonding Brief (PDF)
Change 3. Tightened proper-invoice rules
An invoice is now deemed proper unless the owner gives written notice of a deficiency within seven days of receipt. Combined with prompt-payment timing, the window between issuing an invoice and getting paid keeps narrowing.
Two effects on your underwriting. AR aging tightens, so less old paper sits on the balance sheet. WIP underbillings drop, so your billings keep up with your costs. Both improve your current ratio and your working-capital figure on the underwriter’s spreadsheet. The contractors who track this carefully will be in a stronger position at renewal than the ones who do not.
What it adds up to
Three changes, all pointing the same direction. Faster cash. Faster capacity recycling. A higher bar on L&M file discipline.
The contractors who will get capacity increases in 2026 are the ones who can hand the underwriter:
- A clean WIP schedule.
- An accurate backlog projection.
- A working capital number that includes the new holdback timing.
The ones who do not get there will spend the year bidding under their real ceiling. On a $40M revenue contractor, the gap between the right facility size and the wrong one is often $5M to $10M of single-job capacity. That is real bids you cannot chase.
Get the full bonding brief
The full two-page bonding brief covers each change with the underwriting impact, the specific items to put in your submission, and a checklist your CFO can run before your next renewal.
Download the Ontario Construction Act 2026 Bonding Brief (PDF)
Or skip the reading and book a 15-minute Bonding Facility Capacity Diagnostic with Edwin Little, our Surety Business Development Specialist. He will tell you whether your current facility is sized correctly against the 2026 rules.
Book your diagnostic with Edwin
Frequently asked questions
When did the 2026 amendments to Ontario’s Construction Act take effect?
January 1, 2026. The amendments came in under Bill 216 (Building Ontario For You Act) and Bill 60 (Fighting Delays, Building Faster Act).
Do the changes affect performance bonds or only labour and material bonds?
Adjudication reaches L&M bond disputes specifically. Performance bond claims still follow the existing process. The holdback and proper-invoice rules affect both, since both feed into the underwriting math.
My broker has not raised the new rules with me. Should I be worried?
Yes. If your renewal is in the next six months and your submission is built off 2024 financials without the new holdback timing modeled, you are likely being underwritten under your real capacity.
Does Ai Insurance Organization write surety in Quebec?
No. Ai Insurance Organization does not operate in Quebec. We write across the rest of Canada.
How long does the bonding diagnostic take?
Fifteen minutes. Edwin will pull your current facility numbers, ask three or four questions, and tell you whether you have a capacity gap.
Sources
- Osler, Hoskin & Harcourt LLP. Ontario Construction Act amendments now in effect. osler.com
- Fasken. Ontario’s Amendments to the Construction Act Take Effect January 1, 2026. fasken.com
- Glaholt LLP. Major Amendments to Ontario’s Construction Act Coming January 1. glaholt.com
- Surety Association of Canada. Construction Act of Ontario, Prescribed Bond Forms. suretycanada.com
This post is produced for educational purposes by Ai Insurance Organization Inc. It is not legal advice. Verify changes with counsel and your surety advisor before acting.
