Secrets of Bonding 132: Inside the Underwriter’s Skull

Secrets of Bonding 132 Inside the Underwriter's Skull

We’re off on a voyage. We’ll get into the skull of the underwriter for surety bonds and discover what’s inside, Perhaps but not all that much.

In order to be successful in acquiring bonds, it’s essential to comprehend the motives and process of the decision-makers. Let’s get started.

Agency against. Bonding Company

When we receive calls from new clients to have their bond issue addressed, we always make sure to ask, “Do you currently work for an existing bonding company?” The answer usually is similar to “Yes! Acme Insurance Agency.” Acme Insurance Agency.”

The first thing to be aware of is the distinction in the relationship between the agency (or agency) and the bonding company (aka the carrier, the surety, the business). The typical agent (and the agency) is the local salesperson for retail. Their task is to identify potential clients, create their information, analyze it and then submit it to underwriters for their review and to provide continuous support to the customer. They are usually paid commissions and don’t hold any of the risk associated with the bonds.

The Surety (bonding company, also known as the carrier) assumes the risk. They are the ones who collect the bond’s premium. The underwriter, who is their employee is the one who determines whether it will approve the bond and at what conditions.

Once we know who the decision-maker is, we can discuss how and why.

Process – Underwriting Authority

To ensure that there is a uniform and controlled process of decision-making, Bonding companies issue letters of Authority to each underwriter. The instructions are divided into two categories.

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#1. Prohibited transactions. Avoid doing any of these things. It can include different kinds of bonds as well as different scenarios that do not have the support of insurance or do not align with the company’s risk tolerance.
#2 transaction size. This is the value of the transactions. It could be “You may issue the following kind of bond up to the maximum amount of $_______.”


Underwriters receive an annual salary, and in some instances, they receive a bonus for production. The amount is determined by the amount of business that they create. They must operate strictly within the underwriting guidelines. The annual production targets are established and rewarded if they exceed them.

If you feel a nudge of it now, Let’s don our underwriter hats and take a look at some scenarios. As an underwriter, can you put these higher up on the pile?

1. This applicant is not typically required to have performance bonds. In fact, even after three years of business, this is their first time. They tell you “this isn’t an issue” because the contract/ bond is only $15,000.

Situation 2. Maintenance Bond request on a completed contract. A “no brainer?” It was placed by an additional surety. However, the client states that they do not want to utilize them to maintain the Maintenance Bond due to their inefficient service.

Situation 3. The government has offered an IT services contract. The vendor is required to provide an assurance of performance. The agreement provides two one-year extensions, at the decision by the federal government. The surety has to file an announcement of cancellation at least within 30 days of the anniversary date in order to remove the risk. Failure to secure the extension (with the new surety) could result in a claim against the old bond.

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Do you like any of them? We don’t either. What makes them undesirable?

Keep in mind the basics. The underwriters are looking for profitable transactions that they can manage effectively. Case #1 is not good enough. It’s too difficult to create an entirely new file to issue a tiny bond, and that could be the final one over three years to come.

The second one looks like an uneasy underwriting scenario. It could be a performance bond claim or perhaps incorrect financial information that’s making the surety of the incumbent withdraw. It’s not common for bonding companies to change to make a profit.

#3, underwriters can’t take action if their risk is unclear. Because the possible bond term is not defined (and outside the control of the underwriter) and therefore, it is impossible for them to meet the authority of their underwriting.


The underwriters are not able to handle every transaction in the same manner. How do you get your bond accepted?

Begin with an exchange of ideas. This will provide you with some ideas on how you can move forward: “Here’s what I got. Do you have any suggestions?”
Accessibility to files The information should be simple to process. Does the underwriter require PDFs that can be emailed to review? So don’t mail an original paper file or one large JPG (a picture file).
Properly completed forms Are the underwriters required to submit submission of their own form? Make use of it! Answer all the questions, including the difficult ones.
Be cooperative: “Are you sure you don’t already have it? We sent it to you on Monday.” It always astonished me. If an underwriter asks for information, do not ask to prove it. Give it to them – more than once, if needed.
Be aware that regardless of whether the process isn’t easy, underwriters need to be able to approve the business in order for it to stay financially viable. Your bond should be easy to process and simple to accept. It should be the file they’d like to work on the next time.

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Steve Golia is an experienced supplier of performance and bid bonds for contractors. For over 30 years, his expertise has been in the field of solving bond issues for contractors and helping them out when others did not succeed.

The specialists in Bonding Pros have the underwriting ability and market access that you require. It’s all backed by exceptional service and an excellent level of accessibility.



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