Chapter 7
Underwriting Explained
How a surety evaluates capacity, financial strength, experience, indemnity and security before issuing a bond.
Topics in this chapter
7.01
What Is Surety Underwriting?Surety underwriting is the process by which the applicable insurer or Surety evaluates the applicant, the underlying obligation and the relevant circumstances before deciding whether, and on what terms, it is prepared to issue a bond. It is a considered assessment, not a mechanical score.
7.02
How Does a Surety Assess the Applicant’s Capacity?Capacity refers broadly to an applicant's apparent ability to undertake and fulfil the obligation being bonded. A Surety may consider several aspects of capacity together, depending on the transaction and its own underwriting requirements.
7.03
How Does a Surety Review Financial Strength?A Surety may review financial information to understand an applicant's position, its existing commitments and the direction of its results. Financial review is one part of a wider assessment, and no ratio or threshold is applied publicly.
7.04
Why Does Project Experience Matter in Underwriting?Experience with relevant obligations may help a Surety understand how an applicant executes work in practice. It is one consideration among several, and there is no fixed number of years or projects that applies.
7.05
What Is the Role of Indemnity in Surety?An indemnity agreement is generally an agreement that may establish obligations of the Principal and/or applicable indemnitors in favour of the Surety in connection with a bond. Its terms vary, and its legal effect should be understood before it is signed.
7.06
Why Might a Surety Ask for Collateral or Additional Security?Depending on its underwriting assessment and the circumstances, a Surety may request collateral or additional security as a condition of considering or issuing a bond. It is not a universal requirement, and it is not a verdict on the applicant.
7.07
Why Can Underwriting Terms Differ Between Applicants?Two applicants requesting apparently similar bonds may receive different requirements or terms, because underwriting responds to the specific applicant, obligation and circumstances rather than to a published formula.
7.08
What Happens After the Underwriter Completes the Evaluation?Once an evaluation is complete, the applicable insurer or Surety may approve subject to requirements, ask for more information, revise terms, defer or decline. Completing an evaluation does not by itself mean a bond will be issued.
Important Notice
Inquiries and supporting documents submitted through SuretyPH may be referred to the applicable participating insurer for evaluation. Submission does not constitute approval or issuance of a surety bond. Applications are subject to the insurer's requirements, evaluation, underwriting, terms, conditions, and approval.
SuretyPH is a digital platform for surety bond information, inquiries, requirements and request tracking. It does not underwrite, approve, bind, issue, or guarantee any insurance policy or surety bond. Evaluation, underwriting, approval, pricing and issuance are undertaken by the applicable licensed insurance company.