We should congratulate, celebrate, and then follow our own simple and obvious advice, so we are mindful of what made us successful in the first place. That advice usually sounds something like this:

Let s be thankful for a good economy, a strong construction market and the factors that are out of our control that contributed to the great results in 2006.

I hope everyone has a great holiday season and remembers the men and women in the Armed Services who are away from home protecting us all.

Why such owner interest in project collaboration and optimal use of virtual design and construction technology? Simply put, owners want better value out of the design and construction process. Owners also want to stay competitive in the global marketplace, and they realize that the design and construction of facilities is another area of their operations requiring better efficiency and optimization to stay competitive.

BIM technology is not new, however. Certain kinds of engineered projects have been employing BIM technologies for years, but the broader design and construction community has been slow to adopt such technologies. AIA and AGC are trying to change that by developing materials to acquaint their respective memberships with the significance of BIM; in fact, AGC recently released a 48-page publication, titled The Contractor s Guide to BIM (which is available from AGC at www.agc.org), to help contractors understand and get ready for the BIM transformation. Some commentators also are relating that, in order to realize the full potential of BIM technology, project relationships may need to be rethought and restructured, so they reflect a more collaborative philosophy and working relationship.

What is the interest of surety bond professionals in this industry discussion? Plenty! At some point in the not-too-distant future one or more of your contractor or specialty contractor clients may be required to participate in a major project utilizing BIM or related technologies. How will this impact that client s existing risk management practices? What risks might that client knowingly or unknowingly be assuming in a BIM environment? Will related risks, such as standards of care, ownership of documents, costs of new hardware and software, and responsibilities for project communications, be accounted for sufficiently in the prime contract and in the subcontracts? Are your client s existing insurance policies and surety credit sufficient for a design and construction environment utilizing BIM and related technologies? I do not presume to have even partial answers for these issues, but I am sure that they pose questions to which we should be devoting significant thought.

Vigorous industry discourse will be necessary to approach and to find solutions for such questions, and surety bond professionals will have an important role to play. For example, there is, at present, a dearth of industry standards, in the form of standardized protocols and contract forms, to provide guidance. Through its involvement with the Construction Industry Contracts Coalition (CICC), which includes representatives from AGC, CURT and other industry organizations, NASBP has been and continues to be an active participant in one effort to develop such standards, working on drafts of the next generation of standard form agreements and other project documents that account for collaborative relationships and permit use of BIM technology among project participants. Much work remains, however, but rest assured that NASBP will be in the thick of the dialogue.

These materials are provided to NASBP members solely for educational and informational purposes. They are not to be considered the rendering of legal advice in specific cases or to create a lawyer-client relationship. Readers are responsible for obtaining legal advice from their own counsels, and should not act upon any information contained in these materials without such advice.

The new rule, which became effective November 24, 2006, will help the many small construction and service contractors who need this assistance now and in the near future, according to the SBA. The most significant benefits of this rule will flow to small construction and service contractors that had not been eligible for SBG assistance, because their average annual receipts exceeded $6.5 million. Under this new rule, they are eligible, if they (together with their affiliates) meet the small business size standards for their primary industries or the current SBG $6.5 million standard, whichever is higher, as well as meet the other requirements as to place of contract performance.

For further information about this new rule, click here to see the notice published in the Federal Register.

The SBA believes these new amended size standards will need to remain in effect for at least three more years or until the SBA determines that they cause an adverse effect on local small businesses or that they are no longer needed. If the SBA should decide to terminate the size standard, it will publish a proposed rule and seek public comment. The Pipeline will keep you apprised of any developments with regard to this rule.

NASBP thanks all SuretyPAC contributors who helped make the SuretyPAC s efforts during the 2005/2006 election cycle a success. To see a listing of the SuretyPAC members by level of contribution (Gold, Silver or Bronze) to the PAC, click here. If you would like to contribute to the SuretyPAC in 2007 and have not already completed an authorization form, please contact Kathy Hoffman at khoffman@nasbp.org.

HOLLAND, MI Rep. Peter Hoekstra MI-2nd, right, accepts a check from Dennis Scully of Mapes Insurance Agency, Inc., Grand Rapids, Michigan. On behalf of the SuretyPAC, Dennis delivered a check to Rep. Hoekstra, as well as, Rep. Vernon Ehlers MI-3rd. Both Representatives won their races.	JOLIET, IL Rep. Jerry Weller IL-11th, right, accepts a check from Jim Scheer of Scheer’s, Inc., Westmont, Illinois. Scheer delivered the check on behalf of the SuretyPAC and in support of the Representative s campaign. Rep. Weller was re-elected.

NASBP, ASA and ASC plan to exchange information and to work with one another to analyze and to address legislative issues of mutual interest in the 2007 state sessions and at the federal level.

What is the Industry Experience?

According to the SFAA, the last twelve years, produced $3.7 Billion in premium yielding a 16.9% loss ratio in L&P Bonds. Obviously, carriers want this level of profitability and premium in their mix of business so it follows that companies try to make writing this business painless. Of course, there are varying levels of underwriting required for each of the L&P classes. Many class codes require only limited underwriting in the form of an application and/or credit check and others require complete financial disclosure. On the former the return is less, but the process is simple. On the latter, the underwriting is focused on the ultimate risk and aggregate exposure that develops when writing multiple bonds for a particular client. Either way, the SFAA loss ratios in all classes of L&P have traditionally been superb and continue to represent very profitable lines of business.

What Opportunities Exist for You?

As an insurance agent or broker, our work environment is highly regulated by each state and, as such, there are various licensing and bonding rules in all 50 states. This is the first reason to be interested in L&P bonds, if only to be sure that you and other producers in your office are in compliance with statutory requirements. These laws may call for either a resident or a non resident L&P bond. Be sure you know the statute for both the state in which you are domiciled and other states in which you do business. Do not forget that most states require the individual that signs the bond to be licensed there, not just the agency.

We are all familiar with contractor license bonds. For a contractor the appropriate legal authority can be a state, state agency, county, township, city, town or village. It all depends upon where the contractor and the job are located.

Many other types of business activities are regulated by the granting of a license or permit and require the posting of a surety bond. Being familiar with the bonding requirements for the various types of commercial accounts handled by your office can be a source of additional income for your agency. In addition to this, simply knowing all of the L&P bonding requirements allows you to be a central source for your client s needs and is an important reason why the client would never need to seek another agent.

Let s open the door to more opportunities. Consider some of the old line regulated businesses which require bonds and think of the old Surety Association of America rate manual (ceased being printed in 1989). In this manual each main classification of bond had its own colored paper; license and permit bond types were on golden rod colored paper. Some of the major business classifications found on the all state pages is as follows:

• Insurance company qualifying need in order to write business in a state
• Industrial alcohol and alcohol beverages wholesalers, retailers, manufacturers
• Motor vehicle new and used car dealers and salesmen, mileage tax
• Other tax tobacco all types, gasoline, diesel & kerosene, miscellaneous taxes
• Warehousing both state and federal
• Agricultural livestock and produce dealers, grazing and farming on public lands
• Finance collection, real estate, insurance agents, small loan lenders
• All other schools, weighmasters, detectives, employment and travel agencies

All of the above date back to the late 1980 s. Now think of how business activities have changed and new ones have been initiated. The internet and the collateral businesses it has spawned are new and in many cases, regulated at some level. The one historical category which may have experienced the most growth is franchise all. This now includes cable companies, internet connection companies, wireless internet service providers and cell phone towers just to name one niche. These all require bonding. The agent that handled that small start up business in the early 1990 s that needed an L&P bond might have seen the company evolve into a major surety account.

Does anyone know what the next major business activity requiring a single license or permit bond will be? Solving someone s small or unusual requirement can lead to much bigger things. Consider the person who may have said no to the founder of Starbuck s when their first bond was needed.

If you or your staff has questions about a type of bond and the basic underwriting requirements, please consult the NASBP on-line manual at http://www.nasbp.org/membersonly_files/memlogin.cfm which is free to members of NASBP.

Stay on the lookout for additional articles that are dedicated to the Commercial Surety line.

This is the second of a series of articles on Commercial Surety.

Prepared by NASBP s Commercial Surety Committee Chair, Lynne W. Cook. She is Sr. Vice President of Early, Cassidy & Schilling, Inc. in Rockville, MD.

2. As of June 30, 2006, the name change of American Re-Insurance Company to Munich Reinsurance America, Inc. (NAIC# 10227).

3. An additional surety license for American Contractors Indemnity Company (NAIC# 10216). The following state has been added: NY.4. The Guarantee Company of America USA (NAIC# 36650) has changed its address to 25800 Northwestern Highway, Suite 720, Southfield, MI 48075-8410.

5. Beazley Insurance Company (NAIC #37540), has been certified and added to the Treasury’s Listing of Approved Sureties effective 11/09/06.

6. Philadelphia Indemnity Insurance Company (NAIC #18058), has been certified and added to the Treasury’s Listing of Approved Sureties effective 11/09/06.

For a complete listing of all states where these companies are licensed to transact surety business, please refer to the Circular 570 at: http://fms.treas.gov/c570/c570.html

 POSITIONS

JBL & K Risk Services, LLC
http://www.jblk.com
Portland, OR
Key Contact: Jeffrey L. Broyles, AIA, CIC

R & R Insurance Services Inc.
http://www.rrins.com
Waukesha, WI
Key Contact: Gregory A. Barney

Winter-Dent & Company
http://www.winter-dent.com
Jefferson City, MO
Key Contact: Kris Bennett

How to Get It
Order Reprint
Download PDFSurety industry executives, in interviews with SIO, address this issue and much more in SIO s annual surety section published in the Associated Builders and Contractors (ABC) November edition of Construction Executive.

The support we have received from agencies and sureties this year is unprecedented, said Marla McIntyre, SIO Executive Director. At 64 pages, this is the biggest surety issue ever, and it simply would not have been possible without their participation. I know we say it every year, but the surety supplement keeps getting bigger and better!

Pipeline is produced monthly by the National Association of Surety Bond Producers
1828 L Street, NW, Suite 720, Washington, DC 20036-5104
202/686-3700, Fax: 202/686-3656, www.nasbp.org, E-mail address: info@nasbp.org

To read the online version of Pipeline, please go to http://www.nasbp.org/pipeline_12_06