SURETY PRIMER
You’ve paid us a visit because you have a bond need, or are looking for information, so let’s begin with a surety bond primer. They generally fall into two categories – Contract and Commercial.
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CONTRACT SURETY
Bid Bonds / Consent of Surety
These are the “tickets to the dance”. No ticket – you can’t get into the dance. Must be submitted with the bid as evidence of good faith of your intent to enter into a contract for the project, if awarded. It is largely a prequalification tool that indicates your company is qualified to perform what is required under the contract. At the same time it provides the project owner with a means of recovering additional costs incurred should you decline to enter into the contract.
Performance Bond
Build the project to specification, within the time allowed and for the price bid and all is well. If not, this Bond compensates the project owner for direct economic damages incurred by the contractor’s default. A performance bond is issued by a Surety (aka ‘bonding company’) which guarantees the satisfactory completion of a project by one party to another. Any costs incurred by the Surety become the obligation of the Principal to repay.
Labor & Material Payment Bond
The name says it all! This bond, typically written in tandem with the performance bond, guarantees that labor, materials and equipment utilized in the project will be paid from the contract proceeds. While it differs slightly from jurisdiction to jurisdiction, the guarantee usually extends down two levels; i.e direct subcontractors of the bonded company, and their direct subcontractors/suppliers/labor force.
COMMERCIAL SURETY
License & Permit
This is an extremely broad category that runs the gamut from quite benign to extremely risky. The permit obligation may be as simple as ensuring scaffolding is properly erected so as to protect the public, or comply with the statutory requirements of being a notary public. On the other hand, you can also find bonds in this category that guarantee the payment of taxes.
Court & Probate
Probate bonds emanate from matters involving the liquidation of a deceased person’s estate, or the long term care of an “incompetent person” whether they be mentally or physically impaired, or a very young person. Court bonds result from litigation proceedings and are usually imposed by the Court to guarantee the payment of expenses, damages and/or judgments.
Financial Guarantee
The financial backing of a transaction using the balance sheet of an insurance company is rare, and subject to stringent rules and oversight by the various state departments of insurance. There are very few surety companies willing to consider such bonds, but if they do it must be in a special purpose entity where the risk is isolated.
INDUSTRIES SERVED
Telecom
Manufacturing
Renewable Energy
Real Estate
Transport
Construction
Sport & Leisure
Technology
Warehouse & Distribution
Mining & Metals
We Can Help
It all starts with our Mission Statement. Understanding your business and your needs. But it goes deeper. We bring balance and insight to the situation. Our experience puts us in a unique consultative role. That alone is valuable, but without the right markets it’s a tree falling in the forest kind of thing. We represent the broadest possible array of surety companies in the business with worldwide capabilities, both traditional and innovative. There isn’t an answer for everything, but if it exists, we’ll find it.
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