The Leadership Circle is designed for those individuals with between 5 and 15 years of experience in our broker and agency ranks. The idea is to recognize these individuals as the future of our industry and our association. As mentioned in my letter requesting nominations, it is all about getting younger members of our firms involved in NASBP. It is also to provide them the opportunity to interface and interact with leading surety professionals on the agency side as well as the underwriting side at association meetings. These individuals are our future and they can bring much to the table today and even more as their careers evolve. We need to get them involved – TODAY!

I am pleased to tell you that the 5-15 Leadership Circle is up and running. We have 15 individuals in the Leadership Circle and they have been invited to participate in Regional Steering Committees and the NASBP standing committees. We have surveyed them and will design programs and activities to meet their needs.

Congratulations to our first 5-15 Leadership Circle. We look forward to hearing more from each of you in the future. I want to extend a special thanks to all of those firms who participated and nominated individuals. It is your commitment to the future that guarantees the success of the Leadership Circle.

Various interest groups, including associations and organizations representing local governments, small businesses, general contractors and trade contractors, among others, have voiced concerns about the negative impact that such withholding will have on participants in public procurement processes. Among the groups are the National League of Cities and the Government Finance Officers Association, which have stated their concern that the withholding requirements will put counties and cities at a significant disadvantage relative to the private sector in the purchase of goods and services. The National Small Business Association, part of a coalition of organizations, the Government Withholding Relief Coalition, calling for repeal of the withholding requirement, relates that the withholding requirement “hurts honest taxpaying businesses while attempting to find tax delinquents—by essentially forcing companies to provide the federal government with an interest-free loan.” Other groups point out that the withholding requirement may prove to be a substantial, if not insurmountable, barrier to small contractors in the public sector, who, unlike large, well-financed contractors, may not be able afford significant disruption to day-to-day cash flow.

Citing Section 511 as a “revenue raiser” that represents “a significant shift in U.S. tax policy” and that constitutes an “unfunded mandate” on state and local governments, Senator Larry Craig (R-ID) has introduced Senate Bill 2821, the Withholding Tax Relief Act of 2006, to repeal Section 511. In his statements when introducing S.B. 2821, Senator Craig also expressed his concerns that the withholding law will elevate the “cost of doing business.”

In the competitive environment of construction contracting, the 3% withholding requirement on payments to contractors essentially may erase the small profit margins realized by many contractors performing public work. Such a requirement certainly will make public construction less desirable from the contractor’s perspective, resulting in less bidder or proposer interest and, therefore, less competition for public projects at all levels. Who stands to gain from such a law? Public owners? Taxpayers? Contractors? Unfortunately, the “cost of doing business” for all three likely will rise in 2011 unless S.B. 2821 gets traction in Congress.

NASBP is speaking with contractor groups, including the Associated General Contractors of America, the Associated Specialty Contractors, Inc., and others, to oppose Section 511 and to build support for Senate Bill 2821. NASBP will keep you informed on developments with Section 511 in future Pipeline issues. Please do your part, however, and voice your opinion to your elected representatives in Congress.

Acknowledging that the Office of Surety Guarantees had not always been the partner it should have been with the surety community, which, in turn, may have resulted in trust issues between surety companies and the SBA, Lalumiere emphasized that the SBA is committed to making sure that the Program is administered more fairly and efficiently in the future. To that end, the Office of Surety Guarantees has embarked on initiatives to automate applications, standardize processes, reduce cycle times and improve overall customer service. Lalumiere also stated that SBA is supportive of regulations that would implement other improvements, such as the removal of the 1987 rate cap for sureties participating in the Preferred Program, some of which were requested by NASBP, SFAA and AIA in joint comments provided to SBA. A further suggestion to foster a closer working relationship between SBA and the surety community proposed by Lalumiere at the September 8 Meeting is the appointment of an oversight board consisting of surety and producer representatives, who would advise the SBA and offer feedback about the Program’s operation.

Lalumiere emphasized the pressing need for increased surety company participation and Program applications to assure the future viability of the Program. He also issued a request that sureties and producers contact him personally with constructive feedback in order for the Office of Surety Guarantees to understand better the perspectives and needs of the surety community. To provide your concerns, suggestions and perspectives on the Program, contact Frank Lalumiere directly via e-mail at Frank.Lalumiere@sba.gov.

NASBP will continue to meet with and to lend assistance to the Office of Surety Guarantees in order to reinvigorate this important federal program.

• Reduce the frequency of audits required of the Preferred Surety Bond (PSB) Sureties from once a year to at least once every three years.
• Obligate the SBA to pay 90 percent of the loss incurred by a Prior Approval Program’s surety on bonds written for a small business owned and controlled by a veteran.
• Require that a Prior Approval surety must submit fees owed to the SBA within 45 calendar days of SBA’s approval of the Prior Approval agreement (in lieu of the present requirement of payment in the ordinary course of business). Failure to timely remit the fee would allow the SBA to deny its guarantee liability. Background: The SBA charges sureties a guarantee fee on each guarantee bond (other than a bid bond). The fee (rounded to the nearest dollar) is a certain percentage of the bond premium determined by SBA and published in the Federal Register. Subsequent fees are also due to the SBA for contract or bond amount increases. The surety must pay the SBA for the increase the surety’s guarantee fee computed on the increase in the bond premium. If the total amount of increases in the guarantee fee equals or exceeds $40, the surety’s check must be submitted to the SBA within 45 calendar days of SBA’s approval of the supplemental Prior Approval Agreement. Otherwise, if the amount is less than $40 no payment is due until the total amount of increases in the principal’s fee equals or exceeds $40. The SBA does not receive any portion of a surety’s non-premium charges. Also, the SBA does not charge sureties application nor bid bond guarantee fees.
• Allow PSB Sureties to charge premiums in accordance with “applicable state ceilings” and prevailing state rates. For the past 18 years, despite economic and market place changes, surety companies have been obligated to use the 1987 rates set by the Surety Association of America when the PSB Program was first established by Congress.
• Delete existing reference to the expiration of the PSB Program, and
• Allow affiliates of a PSB Surety to participate in the Prior Approval Program. Currently an eligible surety cannot participate in the Prior Approval Program if it either has control or is controlled by another surety or other related sureties in the PSB Program.

Comments on these proposed changes are due to the SBA on or before Thursday, October 26, 2006. If you have points that you wish NASBP to consider in its comments, please forward them to NASBP by e-mail to Kathy Mapes Hoffman at khoffman@nasbp.org by Monday, October 16th.

To submit comments directly to SBA, send them via internet: www.regulations.gov, fax: 202-205-7600 or mail: Barbara Brannan, Specialist Assistant, Office of Surety Guarantees, U.S. Small Business Administration, 409 3rd Street, SW, Washington, DC 20416. Be sure to indicate in your correspondence that your comments are in reference to RIN number 3245-AF39.

At this time the SBA has not announced when the proposed rule would become effective. NASBP will keep you apprised as more information unfolds related to these proposed changes.

Bond Producers and Specialty Contractors to Partner on Surety and Risk Issues
On September 21, NASBP and the Associated Specialty Contractors, Inc. (ASC), an “umbrella organization” of nine national associations of construction specialty contractors, whose combined membership totals more than 25,000 firms throughout the United States of America, signed a formal Agreement to assist each other on issues of mutual interest impacting the specialty contractors.ASC associations are the Finishing Contractors Association (FCA), the Mechanical Contractors Association of America (MCAA), the National Electrical Contractors Association (NECA), the National Insulation Association (NIA), the National Roofing Contractors Association (NRCA), the National Subcontractors Alliance (NSA), the Painting and Decorating Contractors of America (PDCA), the Plumbing-Heating-Cooling Contractors Association (PHCC), and the Sheet Metal and Air Conditioning Contractors’ National Association (SMACNA). This historic Agreement between ASC and NASBP will enhance each organization’s capabilities with respect to surety and risk management initiatives and legislative and regulatory efforts impacting specialty contractors. The Agreement will serve as a catalyst to instill a higher level of communication and interaction among the groups. Already NASBP and ASC members and staff are exploring opportunities to exchange materials, information, and educational opportunities.	Partnership to Expedite Info Exchange Between NASBP and ASC—Daniel G. Walter (right), President of ASC and Chief Operating Officer of NECA, shakes hands with Richard A. Foss, Executive Vice President of NASBP, after signing the partnering agreement between NASBP and ASC. NECA is one of nine national associations of construction specialty contractors represented by ASC. ASC’s combined membership totals more than 25,000 firms throughout the U.S.
“ASC and NASBP share a common interest in ensuring a fair and equitable environment in which specialty contractors can pursue their work,” related Richard A. Foss, Executive Vice President of NASBP. “A partnering relationship among these organizations will ensure a structure to expedite information among the organizations on key issues concerning the surety market, surety credit relationships, and risk management and contract issues for the benefit of all members of these organizations.”Daniel G. Walter, President of ASC and Chief Operating Officer of NECA, stated, “the producer is a key member of the specialty contractor’s strategic team of outside advisors and resources.” He continued, “the producer’s insight on surety relationships, risk management issues, and market forces provide specialty contractors with critical information to direct their businesses on successful paths.”

“Likewise, a close working relationship between NASBP and ASC will provide both groups with insights on key issues confronting their respective members,” said Foss.

Walter added, “The nine organizations of ASC are looking forward to having NASBP as a resource and partner.”

Both organizations have started to implement the Agreement. Already discussed are future efforts to exchange educational materials, initiate legislative and regulatory efforts, exchange industry experts as speakers, exchange contact lists, and other opportunities.

The Agreement was signed by Foss and Walter at the NECA headquarters.

For more information, contact Kathy Mapes Hoffman at 202-686-1175 khoffman@nasbp.org.

Lines of business exempt from this assessment are: workers’ compensation, medical malpractice, accident and health, and federal flood.

The assessment applies to all policies issued or renewed January 1, 2007. Endorsements and other transactions occurring on policies issued or renewed prior to January 1, 2007 will not be subject to the assessment. Refer to the revised instructions for the completion of Form OIR-A1-1688 and the proper reporting of such premium.

Form OIR-A1-1688 Instructions:
http://www.floir.com/Hurricanes/OIR-A1-1688Instructions.pdf

Policyholder Notification
The Office recommends that the company provide a separate line item on the Declarations Page. Florida Statutes do not provide requirements regarding notification to the policyholder of the assessment. However, this is especially important as the FHCF assessment continues for multiple years, during which other assessments could be levied concurrently.

Electronic Data Reporting Instructions
The Office has developed an electronic data reporting mechanism to allow insurers to report quarterly direct written premium data to the Office in an industry-recognized format, the NAIC Annual Statement State Page, along with other information needed to validate proper collection and remittance of the assessment. The reporting system, called “Cat Fund Reporting”, will be available for companies to access at the end of October.

Prior to the first required assessment remittance due date, the Office will schedule and conduct a required reporting cycle to ensure that all insurers required to report are aware of their obligation and are prepared to report and remit assessments. This preliminary reporting will be due no later than November 15, 2006. Additional information will be released closer to the reporting due date.

Once it is available, the Cat Fund Reporting system will be located on the Office’s Industry Portal (IPortal) at https://iportal.fldfs.com/ifile/default.asp
For additional instructions on reporting electronically, go to http://www.floir.com/Memoranda/OIR-06-19M.pdf.

Reporting and remittance due dates are as follows:

• 1st calendar quarter due no later than May 15
• 2nd calendar quarter due no later than August 15
• 3rd calendar quarter due no later than November 15
• 4th calendar quarter due no later than March 1 of the following year

If the applicable due date is Saturday, Sunday, or a legal holiday, then the actual due date will be the first business day immediately following the applicable due date.

Collection and remittance of assessment dollars is critical to the timely payment of debt service on bonds issued by the FHCF to pay hurricane losses. Violation of the directives of the Order will be subject to fines, late fees, administrative costs and other administrative remedies, up to and including, suspension or revocation of an insurer’s Certificate of Authority in Florida.

For more information, go to http://www.floir.com/Hurricanes/FHCF.htm or contact:
Carol McBrier
Florida Office of Insurance Regulation
Office of the Deputy Commissioner (Property & Casualty)
(850) 413-5224
Carol.McBrier@fldfs.com

Commercial Surety has consistently proven that it is an invaluable and necessary segment in creating a solid and diversified book of Surety business. Assuming controlled overhead, it is reasonable to conclude that this business can provide great balance to a Company’s Surety operation.

But what about me, the agent? Well, whether you are a smaller agent looking to expand your business network or a larger agent that needs to place a piece of business for an existing client, you need to be aware of the results noted above. If not the raw numbers, then certainly the simple idea behind placing a new piece of business or retaining an account should be attractive to you.

There are many opportunities to write bonds that run the gamut from a simple license bond to a more complex court bond, an entire program that supports your client’s business plan, or even developing expertise in one type of obligation.

If your staff needs guidance, NASBP’s Commercial Surety Committee has written a manual titled, “NASBP Commercial Surety Online Reference Guide,“ which is accessible on-line by visiting http://www.nasbp.org and clicking on “Members and Affiliates Only.”
The manual explains typical obligations, the complexity, underwriting information needed to submit to a carrier and cancellation requirements. This will prepare them to talk to the client as well as the company representative.

While many of these bonds generate only minimum premium, they will be effective for years with minimal additional work. Other commercial surety bonds generate significant premiums that can impact agency revenues positively, such as court bonds for an appeal against a judgment or a lien against real estate.

Outside of the court and probate bond areas, other Commercial bonds include: Street Opening bonds, Liquor bonds, Game of Chance bonds, Self Insured Workers Compensation and Lost Instrument just to name a few. Each of these bonds carries superb premium opportunity and is welcomed by most surety carriers.

Lost instrument bonds act as a replacement when a security certificate or cooperative certificate is misplaced. These run for a period of seven years and do not renew. This is another case where a single opportunity can generate a very good return for both the agent and the carrier.

Other types of Commercial Surety bonds are : Tax Indemnity, Replevin, Trustee in Bankruptcy, Nursing Home (Patient Trust), Mortgage Broker or Banker, Franchise and Customs bonds. While all of the above can and do vary in the manner in which they are underwritten, all are standard bond requirements from federal, state and city agencies. There are numerous more classes of Commercial Surety bonds.

If you are wondering how to market for these types of opportunity, stayed tuned… This is just the first in a series of four articles that the NASBP will publish for its members. Future articles will address issues that include industry trends, underwriting results, marketing and new Commercial Surety opportunities.

To find out more, go to the Bulletin posted at http://www.dbr.ri.gov/documents/news/insurance/InsuranceBulletin2006-6.pdf

The Department cautions all insurance agencies required to file applications for licensure or registration and have not done so, to submit their applications as soon as possible and not to wait until November 1, 2006. Failure to apply for licensure or registration by this new November 1, 2006 deadline may result in the imposition of a fine of up to $10,000.00.

There is no fee for licensure or registration, and agencies may apply for licensure or registration online at https://aalf.fldfs.com. Additional information regarding the new insurance agency licensing law in Florida may be obtained online at http://www.fldfs.com/Agents/agencyRegLicInfo.htm.

The Department of the Treasury’s Listing of Approved Sureties as of June 30, 2006 has been updated to reflect an additional surety license for Capitol Indemnity Company (NAIC# 10472). The following state has been added: NY. For a complete listing of all states where this company is licensed to transact surety business, please refer to the Circular 570 at http://fms.treas.gov/c570/

Nevada Bonding Agency, Inc.
http://www.lvagency.com/
Las Vegas, NV
Key contact: Margo Ayn Smith