Solve This Surety Case!

What’s wrong with this conversation?

Client: “I need a bid bond for this upcoming project.”

Agent: “OK, the following list of items will be needed to process your request.”

Client: “Wow, that’s a lot of stuff! I may not be bidding all 6 categories of work. If I only bid 4, how much info will you need?”

Ugh! This client doesn’t get it. The conversation got off on the wrong foot. It is important for clients to understand that surety bonds are not insurance. Underwriters approve bonds when they are CONFIDENT regarding the applicant’s ability to perform without causing a loss. Part of reaching that level of confidence depends on having Full Disclosure. If we feel the applicant is holding back, we worry about what may be concealed (loss of confidence), aka no bond approval.

Independent agents offer a valuable service, “I will survey my sureties and find the one that can give you the best capacity and terms. That one will be your best long-term partner.” Notice that rate was not mentioned b/c they vary little from one carrier to the next. The amount of info was also not important. Every underwriter has questions. The most stable, long term markets probably ask more questions than the newbies.

Conclusion: Avoid wasting your production time on rate shoppers and those who don’t appreciate the relevance of having a strong surety partner. They’ll probably leave you to save a dime, anyway…

Call us for Bid, Performance, Site, and Subdivision Bonds 856-304-7348.

FIA Surety / First Indemnity of America Insurance Company
2740 Rt. 10 West, Suite 205
Morris Plains, NJ 07950
Office: 973-541-3417

A- rated by A.M. Best

We are currently licensed in: NJ, PA, DE, MD, VA, NC, SC, WV, TN,  FL, GA, AL, OK, TX

The Clock is Ticking…

Two reminders for you:

  1. One week until our next Free CE Zoom Webinar. On Monday 11/1/21 you can attend “Surety Bonds 101” from your home or office computer. Three free continuing education credits for you. Check it out: Click for info and to register.

2. It’s not too early for your contract bond clients to start thinking about 12/31, which may be their fiscal year-end.

What are the key points?

a. CPA year-end financial statement or in-house prepared FS? Larger bonds require a CPA statement (i.e. starting around $1,000,000) Make sure the CPA has other construction clients – knows how to prepare these documents correctly.

b. Compilation, Review or Audit? Larger bonds require at least a CPA Review (starting around $2,000,000)

c. Accrual and Percentage of Completion are the most common accounting methods we see. Cash method is not acceptable for surety underwriting or banking. Leaves out too much relevant info.

d. Profits, taxes, net worth increases: Your clients need to think about the importance of bonding (growing the balance sheet) vs. controlling the tax bill. These are opposite goals.

e. Don’t borrow money from the company. Pay back borrowed money ASAP. “Stockholder Loans Receivable” directly hurt the bond account.

f. Preview the 12/31/ FS: Important to instruct the accountant to make a “draft fiscal year-end statement” for discussion with the surety. This is the best opportunity to manage the year-end numbers to assure the desired amount of surety credit will be available in 2022.

And one more reminder: FIA Surety is THE Site and Subdivision Bond Market. Need one? Call us! 856-304-7348.

A.M. Best vs. Demotech: You decide

Insurance companies are often rated by Demotech and A.M. Best. They both claim to be superior.  So which one is actually better?

A.M. Best has a 100 year history.  There are no bikers with A.M. Best tattoos, but they must be doing something right.

Demotech is also a force in the ratings war. In 1990 they were acknowledged by Fannie Mae & Freddie Mac.  After hurricane Andrew in 1993, Demotech rose to prominence when they filled a rating void in the southern states.

They both have their fans.  Both are relevant.  That’s why we are especially proud that FIA Surety is highly rated by both!  A.M. Best says Excellent and Demotech says Exceptional!”

Might be an awesome tattoo?

Find out why A.M. Best rates us Excellent!  Call FIA Surety with your next Subdivision Bond.  We’ve been a steady provider for more than 40 years.

FIA Surety / First Indemnity of America Insurance Company
2740 Rt. 10 West, Suite 205
Morris Plains, NJ 07950
Office: 973-541-3417

Visit us: www.fiasurety.com
We are currently licensed in: NJ, PA, DE, MD, VA, NC, SC, WV, TN,  FL, GA, AL, OK, TX

BIG News! A.M. Best rates FIA Surety

We’re pleased to announce the newest addition to FIA’s credentials.

We now are rated by A.M. Best.

“FOR IMMEDIATE RELEASE

OLDWICK – SEPTEMBER 16, 2021 03:21 PM (EDT)

AM Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-”(Excellent) to First Indemnity of America Insurance Company (FIAIC) (Morris Plains, NJ). The outlook assigned to the Credit Ratings (ratings) is stable.

The ratings reflect First Indemnity’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.”

Read the entire announcement here.

For more than 40 years, FIA Surety has been an enthusiastic writer of Site and Subdivision Bonds.

Stability. Fast, flexible underwriting. A “can-do” attitude, plus an A- rating from A.M. Best. You get it all over here. Call us!

FIA Surety / First Indemnity of America Insurance Company

2740 Rt. 10 West, Suite 205
Morris Plains, NJ 07950
Office: 973-541-3417

Check out the surety webinars in our Free CE School: https://fiasurety.blog/2020/08/16/free-ce/

Next webinar: 10/1/21

We are currently licensed in: NJ, PA, DE, MD, VA, NC, SC, WV, TN,  FL, GA, AL, OK, TX

Sub-D Bonds: Like Pulling Teeth?

Cringe when your client’s need subdivision bonds? Why is that? Why is it so hard?

Probably because you’re going to a market that doesn’t write them, or basically dislikes writing them. So getting an approval is like. Well… you know.

The solution OBVIOUSLY is to use a market that loves them, thinks they’re fun. OK, maybe we don’t think they’re fun, but we do like to write them, all sizes and shapes.

For more than 40 years, FIA Surety has been an enthusiastic writer of site and subdivision bonds. We handle one shot deals and big regional developers.

FIA Surety provides A rated, T-listed bonds in every state with the support of our national partners.

Stability. Fast, flexible underwriting. A “can-do” attitude. You get it all over here. Call us!

FIA Surety / First Indemnity of America Insurance Company
2740 Rt. 10 West, Ste. 205
Morris Plains, NJ 07950
Office: 973-541-3417

http://www.FIASURETY.com

Check out the surety webinars in our Free CE School: https://fiasurety.blog/2020/08/16/free-ce/

Surety Bond “F” Words

When you think of Surety Bonds, what “F” word comes to mind?

Is it Financing,
Funds Control or
Factoring?

After reading this article, it might be!

Let’s sort these out:
Financing is premium financing which is typically not available on most surety bonds b/c of their non-cancelable nature.
Funds Control is a procedure the surety may require. A 3rd party paymaster handles all the contract funds, pays all the bills to reduce the possibility of a Payment Bond claim.  
Factoring is used to speed the contractors receipt of monthly payments. The factor is an intermediary that fronts each payment to the contractor immediately, then waits to be reimbursed when the money is released in due course.

Out of these three, Funds Control is the one you may run into. Sureties don’t like Factoring b/c it can result in the loss of dollars needed to complete the project.

Premium Financing is typically not available. However, Funds Control will guarantee the surety’s prompt receipt of the premium, if such an assurance is needed.

Wait! Here’s one more: FIA Surety! Your best carrier for Contract SuretySite and Subdivision Bonds

FIA Surety / First Indemnity of America Insurance Company
2740 Rt. 10 West, Suite 205
Morris Plains, NJ 07950
Office: 973-541-3417
Visit us: www.fiagroup.com

Free CE course on 9/1/21: Advanced Financial Analysis Click
We are currently licensed in: NJ, PA, DE, MD, VA, NC, SC, WV, TN,  FL, GA, AL, OK, TX

Meet the Director of the FIA Surety School

Steve Golia

Steve Golia is a veteran surety producer, underwriter, author and instructor.  

Over the course of the last 40+ years he has held a range of industry positions of responsibility including that of underwriter, bond manager, branch manager, and company officer for Aetna C&S, CNA, Mountbatten Surety, Amwest and FIA Surety.

As a producer, in addition to owning a bonding agency, he has worked for Johnson & Higgins, Haas & Haas, and was a nationally recognized “President’s Club” top producer at Bollinger.

Steve’s original career was teaching, which may explain his love for sharing information about surety bonds – a subject that is mysterious and vexing to many professionals.

Prior to the arrival of the internet, he established a long history of bond instruction through hundreds of classes and seminars that have been delivered for the Federal Government, Universities, Small Business Development Centers, SCORE, and several other public and private bodies.

Steve is a participating author for the Associate in Fidelity and Surety Bonding (AFSB) designation.

You can reach Steve on his cell: 856-304-7348

#188: 10 Tips to BOOST Bonding Capacity!

I never met a contractor who didn’t want MORE surety bonding capacity. Here are TEN ways to Boost that bonding line:

  1. Leave profits in the company. To the extent that bonuses, distributions and salaries are limited, this directly helps bonding (and banking) by maximizing net worth.
  2. Control 3rd party debt, such as bank debt. Limiting such borrowing improves the Debt to Equity ratio, which is a key benchmark for bonding. It also improves the company’s credit rating.
  3. Stockholders / owners should avoid borrowing from the company. This directly reduces the net worth analysis and hurts the Debt to Equity ratio – both are bad for bonding. If such borrowing has occurred, start the process of payback ASAP.
  4. Stockholders / owners can add funds to the company as permanent capital (not a temporary loan).
  5. Funds already loaned to the company by Stockholders / owners can be subordinated to the surety. It then may be treated as net worth rather than 3rd party debt. The loan can also be converted to permanent capital.
  6. Restructure 3rd party debt to longer term. Restructuring short term debt to long term directly increases the working capital calculation – an important benchmark for bonding.
  7. Update equipment appraisal. The monetary value of heavily depreciated equipment can be recaptured and added to the net worth calculation.
  8. Consider leasing buildings and equipment to preserve cash. Q. “Where did all the money go?” A. Oh, we bought a boat!” This DOES NOT help bonding. Company owners can personally buy such fixed assets and lease them to the company. Also, sell unused equipment and hold the cash.
  9. Improve accounting procedures and methods. Better job cost records? Get a mid-year statement? Get a CPA? Get a CPA Review statement? Etc.!
  10. Get a bank line. Even if you don’t need one, available bank credit directly helps the bonding capacity.

Bonus Tip: Pick the right bonding agent and bonding company.

  • The right agent knows construction and has other contractor clients.
  • The right bonding company is a problem solver, a highly experienced and confident underwriter – Like FIA Surety!

Specialists in Contract Surety, Site and Subdivision Bonds.

FIA Surety / First Indemnity of America Insurance Company
2740 Rt. 10 West, Suite 205
Morris Plains, NJ 07950
Office: 973-541-3417

Join our 9/1/21 webinar: Advanced Financial Statement Analysis FREE CE School

An “A Rated” Carrier

We are currently licensed in: NJ, PA, DE, MD, VA, NC, SC, WV, TN,  FL, GA, AL, OK, TX

Beautiful!

LAST CALL FOR 8/2/21 FREE CE

It’s not too late to get in on our Free CE Zoom webinar on 8/2/21 “ETHICS FOR INSURANCE.” Attend from your home or office computer for 3 credits. No exam. Register or watch one minute video about our accredited CE school.

Brought to you by your best carrier for Contract SuretySite and Subdivision Bonds:

FIA Surety / First Indemnity of America Insurance Company
2740 Rt. 10 West, Suite 205
Morris Plains, NJ 07950
Office: 973-541-3417

Visit us: www.fiagroup.com

We are currently licensed in: NJ, PA, DE, MD, VA, NC, SC, WV, TN,  FL, GA, AL, OK, TX