Surety Bonds Overview


Understanding the Bond Process

Today's construction industry is more competitive than ever, and more contractors are interested in public works projects requiring Surety bonds guaranteeing their performance of the contract. Many subcontractors also find they are being asked to provide bonds. Additionally, there is an increasing number of private projects where owners are requiring bonds. As a result, it is imperative for contractors to understand the Bond Process.

How to Get a Contract Surety Bond

The first step to qualify for a Surety bond program is to discuss your needs with your Surety agent or broker. The Surety underwriting process is focused on prequalifying the contractor. A professional Surety insurance agent or broker will provide guidance to the contractor during this process.

Before issuing a bond, the Surety must be fully satisfied that the contractor is of good character, has experience matching the requirements of the projects to be undertaken, and has, or can obtain, the equipment and manpower necessary to perform the work.

The Surety also wants to make sure the contractor has the financial strength to support the desired work program, and has a history of paying subcontractors and suppliers promptly. It will want to see that the contractor is in good standing with a bank and has established a line of credit.

In short, the Surety wants to be satisfied that the contractor is a well-capitalized, well-managed, profitable enterprise that keeps promises, deals fairly and performs obligations in a timely manner.

Business Financial Statements

You will need to provide quality fiscal year-end financial statements for each of the last three years. If the business has been in existence fewer than three years, statements for each fiscal year-end since inception should be provided. Ideally, your financial statements are prepared by a CPA in accordance with Generally Accepted Accounting Principles.

There are three levels of quality for financial statement reporting: Audit, Review and Compilation. An Audited financial statement provides the highest level of assurance to the Surety, while Review and Compilation financial statements provide a lower degree of assurance to the Surety. The level of CPA-prepared financial statements required depends on the size of the requested Surety program.

The typical privately owned contract Surety account provides their Surety with a CPA prepared, percentage of completion, review quality financial statement including:

  • Comprehensive footnotes
  • Completed & Work-in-Progress schedules
  • Annual Accounts Receivables/Accounts Payable and aging schedules
  • Interim statement indicating how current year is progressing, semi-annual basis

After a Surety program has been established with the contractor, the overall performance and financial position of the contractor will be continuously re-evaluated. Positive results may serve as the basis for an increase in the amount of available Surety credit.

Forms You'll Need:

  • Business and Personal Financial Statements and supporting schedules
  • Bank and or Brokerage Statements confirming deposit balances and Loan Agreements

    AmTrust is AmTrust Financial Services, Inc. and its subsidiaries and affiliates including its property and casualty coverage companies. Coverage is underwritten by Developers Surety and Indemnity Company and its property and casualty insurance affiliates (CA ID # 4606-0). In TX, coverage is written by Developers Surety and Indemnity Company or CorePointe Insurance Company. In WA, coverage is written by Developers Surety and Indemnity Company, or CorePointe Insurance Company.

    The described coverages and services are summaries only. In the event of a conflict between this summary and the terms of an issued policy or bond, the terms and conditions of the policy or bond, including any exclusions or limitations, will control. Coverages and services may not be available for all applicants or in all states.

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