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What's New: Government Affairs

Missouri A+ Rating for Sureties Amended

Friday, September 06, 2013  

The City of Riverside in Missouri has an ordinance that requires the surety on its public works project to have a rating of at least "A+" from Best's or "AA" from Standard and Poor's to show it is solvent. SFAA has received a report from a local NASBP producer that the City Council amended its ordinance on September 3 to require a rating of A- or better. SFAA will distribute a copy of the amended ordinance when it is published.

The sureties in Missouri attempted to persuade the City Council to change this surety eligibility requirement when the City began enforcing it. Of the top 20 surety writers in Missouri, all but eight would be eliminated from the market with the application of the A+ rating. Because the sureties used fronting and other arrangements to submit bonds to the City of Riverside that complied with its A+ requirements on several recent projects, amending the ordinance was not a high priority for the City.

The sureties also worked with the Missouri Insurance Coalition on legislation requiring sureties on the bonds for public works projects in Missouri to be on the US Treasury list—in addition to being licensed by the state insurance department, which already is required. It makes sense that sureties should be licensed or authorized by their two regulators—the insurance department and the US Treasury--rather than requiring a rating from a company that sureties pay to rate them. Under the legislation that was introduced late in this year’s session, these two requirements would have been the only eligibility requirements for public works projects in state and local projects in Missouri. The surety eligibility provisions were included in a large bill along with many other provisions. Time ran out and the legislature adjourned before the bill containing the surety provisions could be considered and passed.

Erle Benton, a local NASBP member, picked up when the legislative effort ended and successfully persuaded the City Council to change the A+ requirement.

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