The gypsy gazes intently at the tea leaves. For those who understand their meaning, the future is revealed!

What if you could predict the future in your Surety Bond activities? In this article we will explain how you can!

When a contractor or agent contacts us for a bid or performance bond, one of the first areas we review are the written bonding requirements. Those requirements tell us which bonding companies can be used for the opportunity. They tell us the ones that will fit. By reviewing the written requirements we can predict if our surety is headed for approval or rejection. These tea leaves must be read! When a bond is approved by a surety, and the surety is disapproved by the obligee, the producer is faced with lost commissions, lost time, embarrassment, loss of a client, and maybe even a lawsuit!

So what should you look for?

Bonding is usually found near the insurance requirements. Here are some of the common requirements and what you need to know about them:

Circular 570

This document is published by the Federal Treasury Department, and is often referred to as the “T-list” (T=Treasury). The current edition is easy to look up on the internet.

The T-list names the bonding companies approved by the Treasury department to issue bonds on federal projects, and the maximum amount permitted for each bond. For federal projects, you must use a surety T-listed for an adequate amount. Most of the major bonding companies are T-listed.

In addition to the T-list being a mandatory requirement on federal projects, other obligees may choose to require that a T-listed surety be used. They want to take advantage of the screening process performed by the treasury department analysts.

Two things to keep in mind: If a T-listed surety fails to perform, the treasury department will not care or be responsible. Secondly, there are perfectly good sureties that may have decided to not apply for T-list approval. So not being on the list simply means they’re not on the list. It is not an indication of any weakness or defect.

One final point, a requirement that the surety must be “certified by the federal government” does not literally mean the issuance of a certificate. It simply means “T-listed.” The government calls sureties on the treasury list Certified Companies.

A Rated

This, of course, refers to the A.M. Best rating. This is a frequently used criteria, despite the fact that insurers have gone under while enjoying a favorable Best rating. And believe me, if they are wrong, they really don’t care!

Tip: If your surety does not meet the stated requirement, the credentials of their reinsurer can be brought to the forefront by issuing a cut-through rider. This makes the reinsurer responsible as a primary carrier. It costs a fee, and not all reinsurers will accept the exposure. But sometimes it can be a solution.

“Authorized to do business… “

This is also a common requirement. It means licensed by the state insurance department. It is worth knowing about, because such licensing may actually not be in place.

When there are no written bonding requirements..

Yippeee!? Maybe not.

Be cautious if there is nothing stating that a bond is mandatory. Some obligees want the assurance of knowing the principal is bondable, without actually paying for a bond. You don’t need any more practice, right?

Corporate Surety or Individual surety

Not all sureties are corporations. Some public bodies accept either. Then there are others that only accept a corporate surety. A private obligee may have the latitude to accept both. Make sure you know what is required.

Conclusion: These tea leaves enable you to read the future. If you develop a file using an insurer or surety that does not meet the requirements, you a doomed to a rejection and the related pain.

Understanding the written requirements can assure that you are deliver a product that meets the client’s needs. It’s not magic. It’s just good business!

Steve Golia is an experienced provider of bid and performance bonds for contractors. For more than 30 years he has specialized in solving bond problems for contractors, and helping them when others failed.

The experts at Bonding Pros have the underwriting talent and market access you need. This is coupled with spectacular service and great accessibility.