When your client makes an application for bonding support, they usually do so with the idea that they operate a strong company and would represent no risk to a surety company. It can be a frustrating and maddening thing for the owner to hear that some person called an underwriter, working for some unknown surety company thinks differently, and has either rejected the bond application or is requiring a lot of supplemental information to support the bond request.
The first thing the agent and the applicant need to understand about surety is that it is a credit facility, not insurance. For the most part, surety companies consider bond applications the same way banks would consider a loan application.
Surety companies consider bonding as a zero-risk proposition. It is not like automobile insurance, where even bad drivers can obtain insurance if they can afford the higher premiums charged on such policies. Most surety companies will not issue a surety bond to a company they view as a risk, regardless of what kind of premium the applicant is willing to pay.
So, what does the surety underwriter consider when reviewing an application for bonding support? In its simplest form, surety underwriters look at the Four C's when underwriting. These Four C's include:
Capital. The surety underwriter analyzes the company's financial position as represented by its financial statements. A company's financial statements show its current state, including its working capital, its debt to equity ratio, and how profitable it is.
Capacity. The surety underwriter needs to be comfortable in a company's ability to perform the bonded project. For this C, the surety company will look at non-financial information such as resumes of key employees, current work on hand, project history and project references, and continuity plans.
Credit. The surety underwriter will review the personal credit reports of the company's owners and spouses, as well as a company's credit report, to determine how a company handles its financial obligations. Credit will provide the surety an understanding of a company's, as well as its owners', willingness to meet its financial obligations.
Character. Although the most difficult for a surety underwriter to evaluate, it is probably the most important. Underwriters like to meet with their clients in order to help them evaluate this C. A company's reputation and the references of its clients and suppliers are key items as well in helping a surety underwriter evaluate Character.
Knowing what a surety underwriter is looking for in the application for surety support and what is critical to the underwriting process is where Big "I" Markets partner Goldleaf Surety Services can help. Goldleaf's knowledgeable and experienced staff know the ins and outs of the underwriting process. And their relationships within the surety industry enable them to provide a network with a deep and wide range of bonding capacity for bonds of different sizes and classes of work. All of this makes Goldleaf Surety an important partner to have in your corner for all your bond needs.
You can access Goldleaf Surety through Big "I" Markets. Simply log in to www.bigimarkets.com, or email us at bigimarkets@iiaba.net and an underwriter will contact you.