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Most people would not entrust their rights, assets and health to someone about whom they knew nothing. In today’s complex and competitive world, “doing your homework” is essential to ensuring that professional relationships will produce beneficial results for the company. In fact, developing the right relationships often makes the difference between a company’s success or failure.

Performing due diligence is particularly important when searching for a surety bond producer. For prime contractors and subcontractors looking to participate in public and private construction marketplaces, a successful relationship with a knowledgeable surety bond producer is crucial. Surety bonds are similar to a credit arrangement, and access to surety credit is limited to contractors and subcontractors that can successfully demonstrate the ability to meet the underwriting criteria of sureties. 

Finding the right bond producer is beneficial to a construction firm’s growth and development, not only for surety credit extended, but also for advice on technical and financial matters impacting the business. The wrong fit could mean the company is not in the best position to take advantage of emerging business opportunities. Look for professional surety bond producers who offer business relationships built on trust, honesty and frequent communication.

The Role of a Bond Producer
Bond producers are business professionals who specialize in providing insurance and surety products to contractors, subcontractors and other project participants. Some bond producers may only sell surety bonds; others may sell both insurance policies and surety bonds. They have a broad knowledge of the surety marketplace for construction companies, which have to plan for and manage project risks appropriately.

Unlike producers focused on insurance markets, bond producers have particular insight into the business strategies and underwriting differences among sureties and will act in many critical roles—guide, educator, adviser and matchmaker—to position a contractor to meet the underwriting requirements for surety credit.

It is important to note that bond producers must be licensed by the state in which they do business to provide insurance and surety products. To obtain a license, bond producers typically must complete pre-license coursework requirements and pass a written examination and a background check. Bond producers must then meet annual or biannual continuing education requirements to ensure they stay up to date on issues about their services, products and businesses, as well as to maintain their licenses. Find a producer in the National Association of Surety Bond Producers (NASBP) membership directory at www.nasbp.org.

As licensed individuals, bond producers are subject to control by state insurance departments, which regulate their activities and will act on grievances. State insurance departments often list grievance procedures and other relevant information on their websites. A list of state insurance departments is available on the website for the National Association of Insurance Commissioners at www.naic.org/state_web_map.htm.

Choosing a Bond Producer

Following are sample questions to ask or points to consider when assessing whether a particular bond producer might be a good fit for the company’s needs.
  • Is the producer licensed in the company’s jurisdiction and that of the project?
  • What is the bond producer’s industry standing? Does he or she have a reputation for integritand respect?
  • What percentage of his or her overall business is construction clients?
  • Does he or she have knowledge of construction contracts and subcontracts?
  • Does he or she have an understanding of the construction industry and the construction process, particularly the management and administration of construction contracts?
  • Does he or she possess knowledge of construction accounting procedures, especially an ability to analyze financial statements, work-in-progress and cash flow?
  • For small contractors, does the producer focus on and serve the needs of small contractors?
  • With how many sureties does the producer work?
  • Is the producer specifically authorized to issue bonds on behalf of sureties?
  • Has the producer developed solid relationships with surety underwriters?
  • Has the producer developed solid relationships with other professional service providers, such as attorneys, CPAs and lenders?
  • How aware is the producer of local, regional and national construction markets?
  • How active is the producer in local or national construction associations, such as the American Subcontractors Association, Associated Builders and Contractors, or Associated General Contractors of America, and in local or national surety industry associations, such as NASBP?
  • Can the producer demonstrate a commitment to maintain frequent client contact through newsletters, jobsite visits or client office visits?
  • What other services does the producer provide to help clients with their business needs?
The success and reputation of a business is too precious to entrust to just anyone. Find a bond producer who offers the skills, experience and resources to meet the company’s needs and who is interested in building a long-term relationship. Asking the right questions is an essential step to finding the right bond producer for safeguarding a firm’s reputation and credit.  

Martha L. Perkins is general counsel of the National Association of Surety Bond Producers. For more information, call (202) 686-3700 or email info@nasbp.org.

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