Or: Since a Surety bond is vastly different from an Insurance policy, so is the relationship that produces such.
Diving deeper into the Three Cs of surety from our last post, let’s look at the Character component, specifically the Principal’s relationship with the surety and surety underwriter. This is an extremely important part of the underwriting process and often not given the attention it deserves. This can be one of the best ways to display your character, and one of the easiest.
Why are these relationships important? Surety bonds are largely underwritten on character, and the reason relationships are so important to underwriting is because of the generally hazardous nature of business and specifically construction. Not only is the surety looking to have a relationship with the contractor and surety bond producer, but the surety is interested in the contractor’s relationships with their subcontractors, suppliers, general contractors, and owners. It is common practice for the surety to call prior jobs and suppliers for references. We all know that every job has challenges and obstacles, and the surety is looking for how the contractor handles difficult situations, to make sure the project is completed on time and to the satisfaction of the owner or general contractor.
How to develop a beneficial relationship? For surety companies and underwriters, they want to meet with and have conversations with the principal, and further understand the account submission that was made. Meetings are best (even virtual meetings). As relationships are a two-way street, a meeting not only gives the surety some insight and confidence, but also gives the principal and surety bond producer some confidence as well. Continued, regular communication between the parties, both positive and negative, is important. The surety wants to hear all your success stories as well as how you handled difficult situations. This communication is key. When something goes well, share with the surety; if there is a problem on a job or with business in general, tell the surety right way. The surety and the principal are a team. When the contractor succeeds, so does the surety. If the surety comes to find that the principal needs extra support in a project, the surety has resources for the principal, but the surety needs to be informed. Again, open communication is key.
Who, where and when should principals meet with the surety underwriter? Meetings with the surety are usually reserved for larger, well established principal companies looking for surety programs in the $1,000,000 and up range. These meetings should include all the decision makers and owners of the principal company, as well as the underwriters from the surety, the surety bond producer and sometimes the principal’s banker. Often the surety will want to meet with the principal at their office (or virtually) at the beginning of the relationship. This helps set the stage for the initial surety program. After the initial meeting, the surety likes to meet with the principal at least a few times at a job site if practical. The surety company will typically want to meet at least once a year, after the Principal’s fiscal year-end financial statement has been finalized.
Also see: Building a Solid Surety Relationship
Surety is a Relationship! Let’s build one. Contact us to get started!