As most sureties will be open for a half day, or closed on Friday August 31st, Bryant Surety Bonds will be closed on this day to allow our employees extra time with their families over this holiday weekend. We hope that you all have a great Labor Day weekend, and look forward to providing all your surety bond needs when we return on Tuesday September 4, 2007.
-
Labor Day Weekend Hours
August 30, 2007 by admin
Category: Operating AnnouncementComments (0)
-
Home Prices Experience Largest Price Drop in 20 Years
August 28, 2007 by admin
Well it appears that there is still no relief in sight for the housing market; today a new report was released by Standard & Poor’s shows the largest price drop in 20 years. This report a day after the National Association of Realtors released information’s showing that sales of existing homes dropped for the fifth straight month.
Â
After five years of high times and rapidly rising home prices, the market stalled last year, with prices holding steady or falling as sales slowed. During the past year, lenders have made it more difficult for some people to get mortgages by tightening standards just as foreclosures rise and some who borrowed at adjustable rates facing higher payments they can’t meet.
Â
This market has not only had an effect on mortgage broker’s bottom lines, but has also had an effect on their approval rates and premiums on surety bonds that many states require them to have. In recent months several sureties have tightened their underwriting guidelines for mortgage broker bonds, with even a few closing their doors to this market for the time being.
Category: Mortgage Banker, Mortgage Broker Surety BondComments (0)
-
Contractor License Bonds-"Being Bonded"
by admin
The owners of contractor companies know little of surety bonds especially if they are start up contractor companies. Requirements are often stated as having to be bonded if you are a contractor. What does it mean to be bonded? What different bonds are available if any and how does one apply for such bonds? All of these good questions will be answered in this posting.
First, there is fundamental terminology that must be understood. Bonds are written if and only if required by another party and involve three parties, thus the bond is a three party agreement. The three parties are the principal, the obligee and the bonding company. The principal is the contractor. The customer requiring the surety bond is the obligee. The bonding company or agent underwrites the bond. A contractor cannot self proclaim to be automatically “Bonded� nor can he obtain a bond just for that reasoning. This misconception is common as the contractor must first qualify for a surety bond and there must be three parties involved. Another misunderstanding is that a bond and insurance are the same. Actually, a surety bond is more to the liking of a form of credit and far from an insurance policy. Underwriting a surety bond is similar to issuing other forms of credit like loans.
Some specific bond types are contactor license bonds and a contract bonds. Contractors are required to obtain one or both of these surety bonds and these bonds guarantee precisely what they are called. A contractor license bond required by the state or local municipality guarantees that the contractor shall operate within the rules and guidelines of the license they hold with that government. A contract bond however guarantees that specific contract. Contracts vary and so does the bonds. The contract bond is one of many bond type categories. There are sub categories for contract bonds. A Bid bond is a subcategory of a contract bond. The bid bond guarantees that if the contractor is awarded the job, he / she will perform at the bid amount and will qualify for the required performance bond. A performance bond guarantees that the contractor shall perform the job cited in the contract. These two contract bond sub category types are the most common in this contract bond category but there are many others and are specific in their nature.
Contractors may also be required to obtain a letter of bonding capacity from their agent. This bonding capacity is similar to a line of credit. The contract bond line has an aggregate limit and single limit that the contractor is held to. For example, the contractor has $250,000 single and $500,000 aggregate bond line. The bond line is a boundary where the contractor cannot accept any single jobs over $250,000 and may not have more than $500,000 of bonded work at any given time. The contractor and producer / agent must communicate well as these bond limits are a vital part of their business. The contractor will make the best use of their surety credit when corresponding well with their producer / agent.
Although the contractor is required to obtain surety bonds, this does not protect him. Contrary, this protects the obligee in this case the government or the party requiring the bond. When a claim is filed, the contractor is responsible for payment. The surety will also seek the principal for any legal fees or fees associated with the claim. As you can see, a surety bond is not an insurance policy.
This should clear up any misunderstandings about contractors bonds and contract bonds. If you are asked as a contractor if you are bonded you can respond with certainty of bond types, categories, sub categories and so on. This will also help when speaking to an agent on obtaining a bond. Your bond producer will ask you questions on what type of business you have and what type of bond you require. Conversations will not be one sided now that you are somewhat educated on contract bonds.
Category: Contract Bonds, Contractor License, License and PermitComments (0)
-
The Future of the Surety Industry
August 21, 2007 by admin
When writing a traditional surety bond, losses are not considered. For instance, approval on a surety bond is for all practical purposes designed to be flawless and have no claims. If the underwriters believe that the applicant will not have any claims, they should be approved. By comparison, insurance underwriting expects that there will be losses and as a result the premiums are higher. If a surety bond applicant is considered high risk, some sureties may require the applicant to post 100% collateral, while other bonding companies flat out decline the offer. This is about to change. Some agencies are rethinking how bonds should be written for future considerations. As this is a traditionally conservative industry, these fore-thinkers are a minority.
Losses are not expected in underwriting a surety bond because this is supposed to be a service fee. Unlike an insurance policy, claims are not built into the premiums because claims are supposed as non-existent. These suretyship guidelines are antiquated because the reality is, losses do occur, even with the most conservative of agencies. No matter how great the underwriting, we now know that losses are, although limited, inevitable. It has taken some time for bonding companies to realize this. Now recognized, why not change our philosophy on underwriting? A bond should be written with premiums that reflect the principals’ risk factor. A high risk principal should have higher premiums. Although this makes sense, it goes against the grain of traditional bonding companies.
Approving high risk surety bonds with higher premiums is not new. In fact, this has been around for years. We have worked successfully with clients and these high risk / high premiums are proven methods in our business. Even with rates 10 to 15 times higher than average commercial bonds, this still is the best course of action for applicants with bad credit. What is more surprising is that little claims have been filed in this high risk program. They are considerablely less than the 5 to 15 claims per average traditional surety. I can only speculate that high risk principals are very conscience during the bond existence, as they do not want to stay as high risk. Bonding companies who are writing these types of programs are producing well. Some still wary after the fall of the soft market, are reluctant to take the risk, but the new thinkers are capitalizing and creating a monopoly for themselves.
What is even more rare, are sureties willing to write higher risk contract bonds. The approval for bonds for a five-year contract virtually does not exist these days. Fortunately, there are some contract bonding companies that are willing to change traditional suretyship and take larger risks with the expectation of a 0% loss. Following the high-risk commercial bonds, higher risk contracts, also known as long contracts, will expect increased rates as well. Just as surprising to us are the sureties willing to write the higher risk contract bonds do not experience greater losses than their peers who shy away from writing such bonds.  The average loss ratio of our new thinking contract bonding companies is 14.35%, which is lower than many of old style sureties. One reason for this is their high volume as they have a monopoly on the market, and remember few sureties are willing to write these dangerous bonds.
Surety underwriters contact us often about wanting to do business with us. These underwriters are well aware of our reputation of being a high volume agency that has a diverse range of accounts and they want in on the action. Rarely do we get appointed with new sureties, for they offer the same as the competition. They will need to think outside of the box if they wish to increase their book of business and re-create underwriting and rate guidelines. Our agency would not want to set our clients up with a surety that is no different from every other market out there. We suggest finding market segments that are not flooded with other sureties offering identical programs. If you are an open-minded underwriter looking to expand your book of business, please contact us. We have set up numerous programs and continue to be successful to date. We agree with the philosophy of approving programs with higher premium rates which offset the cost of claims and we differ from the market which might have been soft in the past approving higher risk bonds.
The time is now when the surety industry realizes that a 0% loss is not an option. The way traditional business has “always did it before� is past. Old fashion thinking is waning and the new way of forward thinking will be the only way to survive in this industry.
Category: Arc Bond, Bad Credit, Contract Bonds, Contractor License, Court, General Surety Information, ICC, License and Permit, MVD, Mortgage Banker, Mortgage Broker Surety Bond, Seller of Travel, Subdivision, TelemarketingComments (0)
-
Mixed News For The Housing Market
August 1, 2007 by admin
Two reports released today gave mixed reports on the housing market. The first showed that pending sales of existing homes rose by 5% in June compared with the previous month, an unexpected and positive sign. In fact it was the largest monthly gain in more than three years.
 One the other hand, Mortgage Brokers felt the volume of mortgage applications drop last week, to their weakest level in over five months. The home loan demand eroded amid escalating credit concerns.
It appears that the road to recover for this industry is still not set. In fact many mortgage brokers and bankers are becoming licensed in additional states to help supplement income, one requirement of most state requires one to apply for a mortgage broker surety bond. Learn more about mortgage broker bonds.
Category: Mortgage Banker, Mortgage Broker Surety BondComments (0)
