By Darrel Lamb and Todd Taylor of Old Republic Surety

The surety market is huge, with some $6.9 billion total direct premiums written in the U.S. market in 2020, according to Best’s Review magazine. And with tens of thousands of licensed insurance agents, there are many producers that sureties can work with.

How do sureties choose?

A successful bond producer must embody characteristics such as character, knowledge, and experience. It’s not always easy to judge those characteristics, but it’s a critical part of a surety underwriter’s job. After all, we’re determining which partners are best to work with to extend credit.

Surety underwriting is built on the three Cs of character, capacity, and capital. Some say character is the first C because it is the most important. Many qualified producers have good character. NASBP membership is a productive way to start screening for that attribute.

Considering someone’s character means making a judgment call. Here are examples of character and lack of it:

• Good character was shown by an agent one of us worked with for a bond case early in our career. The surety approved a bid bond, and the bond producer set out to deliver it. When he got to the contractor’s office, he saw something in the operation he didn’t like in terms of safety and reliability. Rather than delivering the bid bond, he kept it in his briefcase. It is no surprise that that agent was an NASBP member.
• A lack of character was shown by an agent for a contractor seeking a surety bond. At an initial meeting, the contractor’s hand was wrapped in a homemade cast. He explained that he had punched the wall in a bar the prior night while with an inebriated coworker. As underwriter, we decided not to write the bond. The bond producer fell short because he knew there were character issues but didn’t bring them to light. “I just sell stuff” sometimes is the explanation offered by the surety bond producer in a situation like this. Frankly, that’s not good enough.

NASBP calls on members to fulfill high expectations:

As trusted advisors, professional surety bond producers act in many key roles to position their clients to meet the underwriting requirements for surety credit.

An analogy we use at Old Republic Surety to describe quality bond producers is that of a medical professional. If someone gets a back injury, for example, he or she can go to a general practitioner or a specialist. A specialist might be more suitable because of education and/or experience focused on back injuries, which a general practitioner likely doesn’t have.

It’s a similar situation with bond producers. Insurance agents deal with a broad range of insurance products. Think of them as general practitioners. But an agent experienced in surety bonding, who makes the effort to meet the requirements of joining NASBP, is more like the specialist. Joining NASBP means he or she has taken the opportunity to develop professionally through NASBP’s resources and likely has more experience and exposure to surety bonding.

Further, it’s our experience that many NASBP members we deal with have experience on the surety carrier side as underwriters. This sets them apart. This experience gives them an awareness of what is required to underwrite a case. It’s vastly helpful in underwriting when a producer is knowledgeable about the information and criteria used when evaluating a surety risk.

NASBP members in our experience also tend to want to do the right thing for their client and the surety, even if they may push their sureties at times. For example, one agent’s professionalism led him to point out a problematic issue to the underwriter even though the underwriter was unaware of it. That shows how professional producers want to be transparent with the facts of a case.

NASBP points out that members professionalize the market by serving as an “objective, external resource for evaluating a construction firm’s capabilities” and suggesting “improvements to help the construction firm meet a surety company’s underwriting requirements.” We agree and expect that higher-level professionalism from a producer such as one who would go the extra mile to join and participate in NASBP.

Another key benefit of membership in NASBP is that it helps a producer to develop professionally. Remaining active with surety associations like NASBP and construction associations can keep the agent current on relevant topics impacting surety clients.

On its website, NASBP gives information to construction firms about selecting a bond producer. The questions it advises a contractor to ask about a bond producer include queries about integrity, experience, relationships, and knowledge. Surety firms also are well served to ask these same types of questions when choosing bond producers with whom to conduct business.

Darrel K. Lamb, CPCU, AFSB, is Regional Vice President based in Portland, Oregon, for Old Republic Surety. He can be reached at dlamb@orsurety.com or 503.972.8111.

Todd Taylor, CPCU, AFSB, is a Bond Manager based in Orlando, Florida, for Old Republic Surety. He can be reached at ttaylor@orsurety.com or 321.460.5967. 

Sources:

Best’s Rankings, U.S. Property/Casualty — 2020 Direct Premiums Written by Line. Best’s Review. August 2021. https://news.ambest.com/articlecontent.aspx?pc=1009&AltSrc=108&refnum=310909. Accessed July 22, 2022.

Inside NASBP. National Association of Surety Bond Producers. https://www.nasbp.org/inside-nasbp. Accessed July 22, 2022.

Who are Surety Bond Producers? National Association of Surety Bond Professionals. https://www.nasbp.org/getabond/about-surety/who-are-producers. Accessed July 22, 2022.

About NASBP. National Association of Surety Bond Professionals. https://www.nasbp.org/about. Accessed July 22, 2022.