10 Surety Underwriting Concerns

May 24, 2023

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Surety bond underwriting is essentially the pre-approval and evaluation of the two bond performance requirements. These requirements were determined by the principals and are evaluated to assess the principals risk level. When it comes to the entire underwriting process, there are a list of concerns that come into play. Here are 10 Surety underwriting concerns you should be aware of:

  1. Job profitability
    This reflects a contractor’s estimating ability and project management skills.

  2. Overhead expenses

  3. Experience and track-record

  4. Geographic familiarity

  5. Debt-to-worth ratio

  6. Bank line usage
    Surety companies prefer to see bank line availability.

  7. Outstanding tax liens
    Most Surety companies will want a payment plan in place.

  8. Pending lawsuits or disputes

  9. Underbillings
    Surety companies are concerned with underbillings that are due to unapproved change orders as this may indicate a “profit fade” or job loss. Underbillings due to timing issues are okay and not a concern.

  10. Overbillings
    Generally, it is good to overbill a project. However, the Surety wants to see the cash reflected on the balance sheet. High overbillings and low cash balance indicate job barrow and cash flow issues.

It is important to note these concerns and look for any indication prior to the underwriting process of a Surety bond, in order to prevent any further issues. It’s important to work with an experienced Surety Broker who knows how to address these concerns with underwriters. If you have any questions, reach out to us and receive a free Surety review.

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Topics: Surety Bonding

Written by The TSIB Team

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