What Does a Surety Company Look for in an Applicant?

The short answer

There is no universal checklist. Underwriting criteria differ by insurer, by applicant and by the obligation being bonded. In general terms, a Surety may consider who you are as a legal entity, your financial condition, your experience with work of this kind, what you already have outstanding, the obligation itself, and what indemnity or security you can offer.

Areas an insurer may consider

Legal and registration standing

Whether the applicant exists and is authorised to take on the obligation: registration documents, business permits, tax registration, sector licences where applicable, and evidence that the signatory is authorised to bind the company.

Financial condition

Financial statements and supporting records may be reviewed for the picture they give of liquidity, net worth, working capital, borrowings and profitability. What matters is not a single figure but whether the accounts are current, internally consistent and consistent with the size of the obligation being applied for.

Experience relevant to the obligation

Whether the applicant has performed comparable work — similar in type, scale, complexity and location — and how those engagements ended. Completion certificates, contracts and references may be relevant here.

Current workload and existing exposure

Bonds already outstanding, ongoing contracts, and commitments in the pipeline. An insurer manages total exposure to one applicant, so a new application is read alongside what it already carries.

The obligation itself

The bond type, the amount, the validity period, the Obligee and the wording of the Obligee's bond form. An unusual or open-ended bond form, a long validity period, or an obligation outside the applicant's usual line of work may attract more questions.

Indemnity and security

The indemnity agreement to be signed, who signs it, and whether any collateral or other security is offered or required.

Disclosure and conduct

Consistency and candour in what is submitted, and any history of claims, defaults or disputes. Insurers generally treat an inconsistency discovered later far more seriously than a difficulty disclosed at the outset.

What this list is not

It is not a set of thresholds, scores or ratios you must satisfy, and it is not insurer-specific. Two insurers can weigh the same file differently, and the same insurer can reach different conclusions for two different obligations. Requirements, evaluation, terms, pricing and approval are determined by the applicable participating insurer.

Preparing your own file

Assemble the requirement document, current registration papers, your latest financial statements, and evidence of comparable completed work, and check that names, amounts and dates agree across all of them. Where something in the file needs explanation — a loss year, a change in ownership, a first bond of this size — a short written explanation submitted up front is usually better than leaving the question to be raised later.