Author, Matt Gaynor, Director of Surety, Rancho Mesa Insurance Services, Inc.

The Rancho Mesa Bond Department is currently appointed with 25 surety carriers to support our contractor clients with all sizes of bond programs. It is key that the contractor is matched with the correct bond company to ensure timely approval for bonding. For both new and existing clients, we look at several factors to ensure you are partnering with the bond company that will provide the best single and aggregate bond program at the most competitive rate.

During our initial meeting, we will determine the program size required to make your company successful. We discuss the underwriting requirements of several surety markets to determine the best fit. Two questions that assist us in the process are:

1. What financial presentation do you have at your fiscal year end (i.e., audit, review, compilation, internal) and how often do you prepare internal financial statements?

2. What was your largest single project and what do you anticipate needing in the next two years? (Same question is asked for aggregate program.)

Then, we will discuss the bond markets that best fit your needs. Below is a general breakdown of five categories of bond placements:

1. Fortune 1000 and larger regional accounts – we work with seven large carriers with US Treasury approved limits in excess of $500,000,000. The bond company will typically require annual audited financial statement and quarterly internal statements.  

2. Accounts with a strong balance sheet, bank line of credit, audited or reviewed financial statements, and quarterly work in progress schedules – 11 middle market carriers can support these programs where an occasional bond will exceed $50,000,000.

3. Accounts with good balance sheets but also lean on the personal net worth of the owners. The largest segment of 15 carriers support these contractor accounts. 

4. Accounts were the personal net worth of the owners is stronger than the company assets and essential to support bonding. There are 5 players in this area.

5. Credit-based bond programs for contractors that only require an occasional bond under $750,000. These require the least amount of paperwork, but also the highest premium rate. Several national bond companies offer small bonding programs. 

If you would like more information on how your particular company matches up with a particular carrier, please contact me at 619-937-0165 or mgaynor@ranchomesa.com.