Your contractor client calls to discuss their insurance coverage and mentions a project they’d like to bid on. They tried to get the required surety bond somewhere else but were declined, so they assumed the opportunity was off the table.
That’s worth another conversation. A decline from one surety doesn’t necessarily mean the contractor is unbondable. Different surety markets have different underwriting appetites, and a wholesale surety broker can help you identify potential markets and determine whether there is another path forward.
Why Would a Surety Bond Application Be Declined?
Surety underwriters look at the contractor’s ability to meet the obligations associated with the bond. Surety bond requests can be declined for several reasons, including:
- Poor or limited credit history: Credit challenges can affect how a surety evaluates the principal and the account.
- Insufficient financial history: New and emerging contractors may have limited financial records, while larger bond requests may require more formal financial reporting to demonstrate working capital and financial strength.
- Limited experience: A contractor pursuing its first bonded project or moving into a different type of work may not have an established track record for the opportunity being considered.
- Bond amount exceeds current capacity: Underwriters compare the size and complexity of a proposed project with work the contractor has successfully completed. A substantial jump in project size or complexity can create concerns about overextension.
The submission itself matters, too. Underwriters need sufficient time and information to evaluate the contractor, the proposed project, the financial statements, and the work-in-progress schedules. A detailed, complete submission provides a clearer picture of the account and gives the underwriter an opportunity to address questions during the review.
A concern in one of these areas may lead to a decline, but it does not necessarily mean the contractor is unbondable. It may mean the account requires a closer look and a surety market with a better underwriting appetite.
How a Wholesale Surety Broker Can Help
As with hard-to-place insurance risks, different surety markets have different underwriting appetites. An account that falls outside one market’s parameters may be a better fit for another, but finding that fit requires more than sending the same submission to a longer list of sureties.
A wholesale surety broker can help the retail agent evaluate the account, identify potential underwriting concerns, and determine which markets may be appropriate. That includes understanding how factors such as financial strength, experience, current workload, credit challenges, and requested bond capacity are likely to affect the placement.
For harder-to-place accounts, a wholesale specialist can help with:
- Market access: Established carrier relationships provide additional options for accounts that may not fit standard markets.
- Market knowledge: Understanding different underwriting appetites helps narrow the search to sureties that may be a better fit for the contractor.
- Submission strategy: A complete, well-organized submission gives underwriters the information they need to understand the contractor and evaluate the opportunity.
- Challenging circumstances: New contractors, credit-challenged principals, growing contractors seeking greater capacity, and businesses recovering from previous financial issues may require a more specialized approach.
Cochrane & Company’s bond team works with clients seeking their first bond as well as those with established bond histories. Its carrier relationships allow the team to pursue a variety of bond opportunities, with a four-hour turnaround on quotes and financing available on many accounts.
Helping Brokers Keep More Contractor Clients
As contractors pursue new projects and grow their businesses, their insurance and bonding needs can change. A client who relies on you for contractor insurance programs may also need a bid bond to pursue a project, followed by payment and performance bonds if the contract is awarded.
Being able to help with those needs gives you another way to support the client’s business. If a contractor has been declined elsewhere or presents a challenging bond opportunity, bringing in a wholesale surety specialist may uncover options the client didn’t know were available.
Cochrane & Company offers bid bonds and payment/performance bonds, along with general contract, license and permit, and maintenance bonds. Working with a wholesale resource for challenging bond opportunities allows you to maintain your relationship with your client while addressing a broader range of their business needs.
Hard-To-Place Bonds Aren’t Unplaceable
A previous decline or a challenging underwriting factor doesn’t necessarily close the door on a bond opportunity. An experienced wholesale surety partner can help determine where the account may fit and how it needs to be presented.
Cochrane & Company’s bond team works with retail brokers to find solutions for challenging surety accounts. In addition to contract and construction bonds, Cochrane offers transportation, farm labor, motor vehicle dealer, and miscellaneous bonds.
Have a contractor who was declined elsewhere or a challenging surety opportunity? Contact Cochrane & Company to discuss the account and explore available options.
About Cochrane & Company
For more than six decades, Cochrane & Company has been proudly at the forefront of the insurance industry. Our experience has enabled us to innovate in powerful ways, reimagining the E&S market, and providing technology solutions that make it easy to do business with us. Licensed in all 50 states, we proudly serve clients across the nation, providing personalized and powerful solutions to help you become an even better partner for your clients. Speak to one of our experienced professionals today by calling (855) 967-0069.