How do I choose the right Surety company/agent? What should I be looking for?

These are certainly important questions to ask. Though there are many agents out there and many ways to improve your program, the answers to those questions can be complicated because no two contractors are the same. They all have different circumstances.?First, your agent needs to have a thorough understanding of your business. Even more so, they need to understand what you do, your circumstances, and your future goals.?I have spent the last 30 years in the construction industry both as a construction CFO and Surety Producer helping both large and small construction companies position themselves for growth and increased profitability.?Construction is all I do – I don’t just say that for marketing purposes. I grew up in Construction, I’ve worked in Construction, and now I insure and bond the Construction industry. It’s my niche and I can tailor a program that is specialized in supporting your company.

Just as surety bonding companies do extensive research on you as the contractor, it’s equally important for you, the contractor, to return the favor. Choosing the right Surety Agent and Company is key. Here are some things to consider:

Choosing a Surety Agent – Lockton’s strengths

What to look for –

Understands your business needs now and, in the future, – experience COUNTS.

• Lockton is the largest privately held, independent broker in the world.?Construction is our largest industry vertical and makes up nearly a quarter of our revenue.?We embrace our clients’ challenges as our own and protect their interests at every turn. As a client of Lockton, you will have access to any/all company resources needed, without the red tape and internal charges that many of our competitors face.?This flexibility allows us to structure unique service plans to fit our clients’ needs and provide them the appropriate subject matter expert for any questions they may have.

Relationship with other construction professionals – respected by these professionals.

• Lockton prides itself on our relationships with other top consultants in the construction space.?We are constantly connecting clients with best-in-class accounting firms, lawyers, banks, valuations firms, potential J/V partners, subcontractors, and employment candidates.?In addition, over 70% of Lockton associates are engaged in industry associations (AGC, ABA, DBIA, CFMA, ABC, etc.)

Helping your business become more successful.

• Extensive Network - With over 1,000 construction clients nationally and numerous 25-year plus surety industry veterans, Lockton offers an extensive network of peers and experts capable of providing feedback and advice around a multitude of business and strategic issues. Our team is on the forefront of emerging industry issues. The surety group’s operating model ensures that our team is strategically engaged with clients to understand their plans and objectives so we can access the appropriate resources and offer guidance and input, helping to make your business better.
• Lockton is uniquely positioned to help clients source opportunities by intentionally connecting them to our vast network of clients in a wide array of industries, including real estate, oil/gas, communications and architects/engineers. Working with our client base, we routinely help arrange joint venture opportunities as well as connect our contractors to owners with project opportunities.

Trade Organizations and Political capacities

• Lockton uses our stature and our Associates’ leadership roles in various construction industry groups (AGC, NASBP, etc.) to apply pressure on owners that have included onerous contract language, bond forms and more that fall outside industry standards. This allows us to drive change that benefits our clients without them potentially endangering a relationship.
• Lockton has established its own Political Action Committee and is a member of others, which advocate for various industries we represent — including construction at a national level. Additionally, we financially support local construction industry groups that fund local politicians who are supportive of construction-industry initiatives.

Experience in handling surety bonds.

• Lockton has dedicated Surety Departments across the U.S. and Internationally.
• Lockton’s surety practice is trusted with managing the surety programs of contractors ranging in size from startups to multibillion dollar industry leaders.

Surety Company Relationships.

At Lockton, we represent and hold powers for every major surety company — ensuring you will be represented by the best possible surety for your needs. Our national annual surety premiums exceed $160 million allowing us to have great leverage in the marketplace and personal relationships with the decision makers of each Surety.?

Did you know that out of 1,000 insurance agents, only about 10 percent are surety specialists.

My sole focus is surety. Because I specialize in surety bonds, I know what a surety company is looking for in terms of presentation of financials and can effectively tell your unique story by painting the correct and most detailed picture to the surety for a proposed project and/or program.?In addition, my background in financial management is unique in the surety industry.?The fact that I have spent several years as a construction CFO allows me to have a much better understanding of what a contractor goes through on a daily basis and allows me to clearly and effectively communicate the contractor’s business plan and work program to a surety.?

What to look for in a Surety Company

For the last 15 years, the surety industry has flourished in the soft market. The soft market has allowed for ample competition, innovative submission platforms, higher bonding limits, and increased profits. But beware, a hard market is on the horizon.?Relative to insurance there is soon to be a high demand for surety coverage and a reduced supply. Profits are lowering and claim payouts are higher and more frequent. This leads to an increase in premium amounts, stricter underwriting, less competition, and fewer bonds being written.?Despite an increase of competition and capacity, nationwide recessions, global pandemics, and natural catastrophes and disasters can force the market to transition from a soft to a hard market.?As the impacts of COVID-19 are felt the soft market is slowly transitioning into a hard market.?Success in the surety producing sector will boil down to pure experience and knowledge of each carrier’s appetites, underwriting criteria, and specific risks attributed to each type of bond. The thinning of competition among surety producers and agents has already begun.?Having access to numerous sureties, while maintaining key relationships with the main players, allows Lockton to find the best home for each and every contractor.

• Financially strong/Surety Capacity-What is the maximum capacity that your surety offers?

They all have a cap. It doesn’t make sense to partner with a surety that cannot help you achieve the vision you have for your organization and take you all the way. Lockton will help you get there, not hold you back.

• What is my Sureties Rating?

The highest possible surety bond company rating is A++. However, for certain projects such as public bid jobs, the bonding company must have a minimum grade of B+ or higher from A.M. Best (a company that analyzes businesses’ financial strength). Lockton will prevent this from happening without cause.

• What personal data do they require?

An experienced surety will have a well-oiled process for reviewing financials, owner information, business plans, and other data. Knowing in advance what scrutiny you’ll face when obtaining bonding will help you better prepare. We understand revealing personal information is not always comfortable. However, the more detailed and accurate information you provide the surety, the more comfortable they will be with your account-which leads to a better rate.

• What is their construction industry reputation and knowledge?

Your chosen surety company and agent should have an extensive understanding of the construction industry. More specifically, your surety and agent should really understand the area in which your company plays ball. Involvement in both construction and surety trade associations along with a good reputation for helping other construction companies like yours become more successful are key values/qualities to look for.

In Summary

Contractors seeking to maximize their bonding capacity should take an honest and timely look at their overall program and decide on areas for improvement. The best place to start is your team – your “Professional Team” (Bonding Agent, Construction CPA, and Attorney) can help you plan for year-end, evaluate internal controls, identify areas of weakness, recommend areas to maximize credit, and work with their surety relationships to explain the balance sheet to add further credibility.

Lockton takes the time to understand YOU and your business.?We are committed to investing in our relationship to help you reach your goals.?We are heavily involved in your industry and make it a priority to have highly qualified experts to advise you and the right resources and capacity your business requires.?We hold our client relationships in high regard and truly respect our partnership.?

It would be my pleasure to set up a meeting to discuss the opportunity to partner with your company and answer any questions you may have.?Please feel free to reach out to me anytime.