How to Prequalify a Surety ― and Why It’s So Important
This post is part of a series sponsored by Old Republic Surety.
Any insurance agency that has a book of surety business can use the information here about prequalifying a surety company.
The number of surety companies represented in any region can make the task of prequalifying or differentiating among them challenging to say the least. Many bond agents and brokers have access to more than 30 surety company markets, and there can be important distinctions between each of them that should be understood before a selection occurs.
The 3 main ways to qualify a surety company
The following resources make it easy to be sure that the surety company you may do business with is reputable and licensed to do business in your state:
Bond users should also verify the validity of bonds they’ve obtained as part of the prequalification process:
The most important aspects to look for in a surety company
A professional agency surety bond representative can help assist in the prequalification process by using their knowledge and relationships to match a contractor or other party with the right surety based on:
- Underwriting capacity, flexibility, appetite, special programs available and their terms (i.e., quick bond programs).
- Rate filings and criteria, indemnity and subordination agreement language.
- Claim department policies and handling.
- Additional services offered, such as bond-ability letters, peer review and analytical tools for clients.
- Reputation, pending claims or litigation, large surety losses, personnel changes and company acquisitions or consolidations.
In addition to the above, the following resources are helpful when researching surety company information:
- Industry associations
- SFAA (Surety & Fidelity Association of America): This site lists company members and employee involvement in local and national chapters. Company personnel and agents can usually provide surety company rankings, written and earned premium, paid loss and combined operating ratio underwriting performance information. This can be shown for multiple years to illustrate the trend analysis of a company’s rate of growth, loss history, etc.
- NASBP (National Association of Surety Bond Professionals): This site shows company members, methods for networking and resources for education and advocation.
Many parties rely on agency representatives to select the best surety company for their needs. In most cases, this can be the best way of prequalifying the surety beyond the licensing, T-listing and rating agency levels mentioned earlier.
For those with significant bond needs, it’s strongly recommended to have a face-to-face meeting with the surety representatives servicing your bonds prior to selection and at least annually thereafter.
Using these tips for prequalification can help with choosing the right surety company that can fit your needs now and into the future.
If you have any questions about anything regarding surety, contact an appointed agent, or reach out to an Old Republic Surety branch nearest you.
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