TECHNICAL PAPERS
Jul 1, 1990

Surety Industry: Overview

Publication: Journal of Management in Engineering
Volume 6, Issue 3

Abstract

The surety bonding process can be very frustrating for the construction contractor. However, if the contractor has a solid understanding of the process and knows what the surety requires, the frustration level may be substantially reduced and the chance of success greatly improved. Some contractors believe surety bonding has become increasingly difficult to obtain during the past few years. To the extent that sureties have become more cautious in their underwriting, this observation is on target. Sureties suffered significant and unexpected losses in their contract bond business in 1984, 1985, 1986, and 1987. The significant risks, uncertainty, losses, and small compensation in surety bonding forced surety companies to adopt more stringent underwriting criteria and have caused other surety companies to discontinue writing the business. Hence, some contractors (particularly those that are weak financially, managerially, or technically) have been forced to take only unbonded work or discontinue operations. This paper provides a description of the surety industry and analyzes its evaluation and underwriting procedures in an attempt better to educate owners, contractors, and design professionals thereby enhancing their ability to work within the surety bonding process.

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References

1.
Best's insurance reports, property‐casualty. (1989). A.M. Best Company, Oldwick, N.J.
2.
“Bonding, insurance falling short.” (1988). Engrg. News Rec., 220(13), 38–43.
3.
Federal register. (1988). U.S. Dept. of the Treasury, Fiscal Services, 53(127), 198.Washington, D.C.
4.
Glossary fidelity surety. (1989). The Surety Assoc. of America, Iselin, N.J.
5.
Rejda, G. (1988). Principles of insurance, Third Ed., Scott Foresman Publishers, Glenview, II.
6.
Remmen, A. (1977). The contract bond book. The National Underwriter Co., Cincinnati, Ohio.
7.
Surety companies: What they are and how to find about them. (1988). Nat. Assoc. of Surety Bond Producers, Bethesda, Md.
8.
Surety seminar summary.(1987). Alexander and Alexander, Indianapolis, Ind., Nov.

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Go to Journal of Management in Engineering
Journal of Management in Engineering
Volume 6Issue 3July 1990
Pages: 323 - 341

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Published online: Jul 1, 1990
Published in print: Jul 1990

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Jeffrey S. Russell, Associate Member, ASCE
Asst. Prof., Dept. of Civ. and Envir. Engrg., Univ. of Wisconsin, Madison, WI 53706

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