(800) 666-5692 Agent Actions Menu MENU INSIGHTS FROM A CONTRACT BOND UNDERWRITER SEPTEMBER 9, 2021 Posted in Customer Service Author: Steve Kuykendall As the manager of a surety underwriting team and a contract bond underwriter, my role is to offer surety and bonding on behalf of the various companies I represent. You can find many articles and blogs about the three C’s of contract bonds, which are Character, Capital, and Capacity. Each of the three C’s factor into the criteria that is used by underwriters like me to decide whether I will provide terms for a bond. Character: In evaluating character, a surety company will assess whether a company is likely to fulfill its obligations under the contract. One way of doing this is looking into the principal’s prior projects to see if they show operational integrity and efficiency. This includes how the principal pays its suppliers, how well the contractor communicates, signs of any history of that might raise a red flag in terms of trustworthiness or conflicts. Character evaluation also involves how the principal communicates and deals with key stakeholders, such as employees, lenders, surety bond underwriters, and employees. Are they open and transparent? Are they responsive to requests and inquiries? These are questions that need to be assessed by underwriters. Capital: As an underwriter, I must be sure that a principal has financial resilience and support to be able to manage and complete the project and fulfil its obligations under the contract. Underwriters are typically trained to look at financial metrics such as the principal's cash, working capital, net worth, and debt. Does the contractor have a bank line? Are their projects historically profitable? Capacity: This examines a principal’s ability to complete the project under the contract as well as their capacity to support payment for labor and material. Considerations include a look at staffing to indicate if there is sufficient labor and office staff to handle the project and everything it involves. How many other projects is the organization handling currently? Have they done a project of this size before? I have been in the bond business for almost 44 years now. At JM Wilson, I probably decline 15-20% of the risks I see. When I worked for the standard markets, that decline rate was probably closer to 80-85%. The most common reasons for declinations are due to personal/business credit history, financial statements, and previous experience. Back when I first started in the business, financial statements were the most important piece of the underwriting process. but, over the last 15 years, personal and business credit history are even more important than financials, even if just barely. Author: Steve Kuykendall Steve Kuykendall has worked with bonds for 44 years and has spent half of that time with JM Wilson. He loves spending time with his family and enjoys golfing, fishing, and camping. CATEGORIES Brokerage Claims Culture Customer Service Garages Marketing Personal Lines Professional Development Property & Casualty Sales Transportation SUBSCRIBE TO BLOG Want updates when new blog posts are added? Sign up to receive email alerts. First Name: * Last Name: * Email: * Yes, I agree to share my information with JM Wilson and receive communication including email. By agreeing, I confirm that I agree to the handling and processing of my data as described in our privacy policy. SUBSCRIBE Related Blogs WORK-LIFE BALANCE INSPECTIONS: INSIGHT TO A SMOOTH PROCESS FOR YOU AND YOUR INSURED HOW DID I END UP MIRED IN MEDIOCRITY VIEW ALL BLOG POSTS (800) 666-5692 hello@jmwilson.com 8036 Moorsbridge Rd. Portage, MI 49024 subscribe to our channel on YouTube like us on our Facebook page connect with us on LinkedIn Products Commercial Personal Surety & Bonds Applications Premium Financing About Careers Contact Submit a Risk Pay Online Get Appointed Login © 2021 JM Wilson Corporation Privacy Policy JM Wilson uses cookies to track information in order to tailor the website to our clients’ needs. Please see our Privacy Policy for more information. accept