Learn More About Surety Companies

Most large property and casualty insurance companies have surety departments. In addition, there are some companies for which surety bonds make up all or most of their business.

In either case, in order for a company to write a surety bond in the United States, it must be licensed by the insurance department of one or more states. While there are some exceptions, generally a surety company is required to be licensed by the state in which it is doing business or by the state where the obligation guaranteed by the bond is being performed.

INFORMATION SOURCES

The following are sources of information about surety companies.

Insurance Departments

Considering that companies that write surety bonds must be licensed by the state insurance department, an obvious source of information is the insurance department itself. The insurance department of the state in which the surety company is domiciled will usually have the most information about the surety as it is responsible for performing periodic examinations of the company. Insurance departments are located in the state capital and, in some instances, have offices in larger cities of the state. The telephone numbers are usually found under the state listing in the local telephone directory or the states website. Insurance departments are generally responsive to consumer inquires, and any citizen may call the department and request to speak to someone who can provide information on a particular surety company.

U.S. Treasury Department

The United States Treasury Department maintains a list of surety companies that it has qualified to write surety bonds required by the U.S. Government. This list is published annually and then updated throughout the year. The most current list of Treasury authorized companies is always available through the Internet at http://www.fms.treas.gov/c570/c570.html. The Treasury Department requires companies that desire to be included on its list to file financial and other information. This data is analyzed by the Treasury Department which develops a dollar Underwriting Limitation for the company. Each company listing includes the Underwriting Limitation. However, it is important to recognize that a surety may provide a single bond with a dollar limit that exceeds the limit appearing in the Treasury List. When the Underwriting Limitation is exceeded, the surety must be protected in accordance with the following rule which appears as note (b) in Treasury Circular 570:

(b) The Underwriting Limitations published herein are on a per bond basis. Treasury requirements do not limit the penal sum (face amount) of bonds which surety companies may provide. However, when the penal sum exceeds a company's Underwriting Limitation, the excess must be protected by co-insurance, reinsurance, or other methods in accordance with 31 CFR Section 223.10, Section 223.11. Treasury refers to a bond of this type as an Excess Risk. When Excess Risks on bonds in favor of the United States are protected by reinsurance, such reinsurance is to be effected by use of a Federal reinsurance form to be filed with the bond or within 45 days thereafter. In protecting such excess risks, the underwriting limitation in force on the day in which the bond was provided will govern absolutely. A hard copy of The Treasury List (Department Circular 570 - Surety Companies Acceptable on Federal Bonds) may be obtained from the Surety Bond Branch, Financial Management Service, Department of the Treasury, 3700 East-West Highway, Room 6F01, Hyattsville, Maryland 20782 (telephone number 202-874-6850).

A.M. Best Company

A.M. Best Company is a private publishing company that analyzes and rates insurance companies. Each year Best's publishes Best's Insurance Reports, Property-Casualty, which includes a detailed profile of almost all insurance companies operating in the United States as well as financial information about each company. Best's gives each company an alphabetic rating and a financial size category. This book, which is over 2,300 pages in length, may be found in many public and financial libraries. It may be purchased from Best's. Best's also publishes a much abbreviated version of this information in its Best's Key Rating Guide, Property-Casualty Basic rating information is also available at Best's website: http://www.ambest.com (registration required).

Insurance Agents & Brokers

Most surety bonds are issued through insurance agents and brokers who in many instances can provide much information regarding a specific surety company. Professional agents or brokers specializing in providing surety bonds will often have the U.S. Treasury Department Circular 570 and the Best's Insurance Reports, Property-Casualty. In addition, they may be able to assist in reviewing surety bonds for proper execution. Names of agencies specializing in surety bonds may be obtained from the National Association of Surety Bond Producers.

This list of information sources is not intended to be all inclusive, but is merely intended to provide some commonly accepted sources of information. For additional information, please contact The Surety & Fidelity Association of America.