Chapter 7 — Underwriting Explained
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.
Direct answer
A request for collateral or additional security reflects the applicable insurer''s assessment of a particular obligation in particular circumstances. It may be raised in some cases and not in others, and the decision belongs to the applicable insurer or Surety.
Why such a request may arise
The circumstances that lead an underwriter to raise it vary. They may relate to the nature or size of the obligation, its duration, the applicant''s current commitments, the information available, or other factors specific to the transaction. Because the assessment is specific, so is the request.
What a collateral request does not mean
- It does not mean collateral is required for every applicant.
- It does not mean collateral is required for every bond.
- It does not mean the application will be declined.
- It does not mean the bond will be approved once collateral is discussed.
- It is not determined by SuretyPH.
What this guide does not state
No collateral percentages, acceptable forms of collateral, valuation methods, holding or release periods, or insurer-specific policies are set out here. Those are matters for the applicable insurer, and any requirement should be confirmed directly with it in the specific case.
Practical points
- Treat a request as part of the evaluation, and clarify precisely what is being asked and on what conditions.
- Consider the timing of the requirement against contractual or bidding deadlines.
- Where the request is documented, read the terms carefully, including how and when any security may be dealt with.
- Where the legal effect is unclear, obtain appropriate professional advice. Related obligations may also arise under the indemnity arrangement: see What Is the Role of Indemnity in Surety?.
For the wider assessment this sits within, see What Is Surety Underwriting? and Why Can Underwriting Terms Differ Between Applicants?.
Key considerations
Evaluation, underwriting, documentary requirements, financial assessment, collateral requirements, terms, premium, approval and issuance remain functions of the applicable insurer or Surety. SuretyPH does not underwrite applicants, calculate bonding capacity, assign risk scores, set premiums, determine collateral, approve or decline applications, determine final bond terms or issue bonds.
Key takeaway
Collateral or additional security may be requested in some cases as a condition of consideration or issuance. It is not universal, not a decline, not an approval, and never determined by SuretyPH.
Related topics
Relevant bond information
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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.