What is it?
A surety bond is a guarantee of performance of an obligation. The bond itself gives rise to a three party relationship where the Surety agrees to fulfill the obligations of the Principal (the 'insured' or bonded party) to the Obligee (the beneficiary of the bond), in the event the Principal is unable to do so. The Surety stands behind the Principal as a guarantor or 'co-signer'. The Surety typically does not become involved unless the Principal is in legitimate default of their obligations to the Obligee, at which point a claim is made under the bond and the Surety steps in to remedy the failure to perform.
The uses and application of surety bonds are unlimited. Obligations of almost any nature can conceivably be bonded, however, the mainstream use of this product can be classed into two types:
Contract Surety — Bonds that are sold mainly to construction companies and some manufacturers and suppliers which guarantee their contractual obligations to project owners or construction purchasers, some lenders and/or other interested parties.
Commercial Surety — Bonds sold to companies and individuals in order to satisfy government regulations and court orders, or to replace lost documents such as share certificates.
Developer Surety — Bonds sold to condominium developers in Ontario to satisfy their security requirements to the Tarion Home Warranty Corporation, which then guarantees their contractual obligations to purchasers under the Ontario New Home Warranties Plan Act.
Surety is not insurance. It is more closely related to the commercial lending practice of financial institutions. As such, a surety needs to satisfy itself that the party they are bonding has the experience, financial and capital resources necessary to perform their obligations. Further, if called to pay out under a bond, a Surety will seek recovery for their losses under an indemnity agreement or other security typically taken at the start of the relationship.Why Trisura?
We Are Motivated. At Trisura we want to write business, even in a tough economy. We recognize that when our brokers and their clients grow and prosper, we do the same. We find innovative ways to incorporate all the merits of an account into our decisions and look for ways to say 'yes' rather than 'no'. Moreover, we continually look for ways to make it as easy as possible to do business with us.
We Are Experts. When you speak to one of our underwriters, you can instantly appreciate how a true expert can help find solutions to write business. Whether it is a new account or a complicated bond request, we empower our front line underwriters to make intelligent decisions and to provide immediate and exceptional service to our brokers and their clients. While the industry is laden with inexperienced underwriters, our team is composed of seasoned underwriters who bring with them knowledge and expertise from a variety of disciplines.
We Are Partners. We develop relationships with our brokers and their clients. It's the inherent core of our value proposition. We truly believe we are your business partner and as such we don't just filter through financial information and applications. We meet with you and your clients, hear their stories and find ways to grow all of our businesses in a shared spirit of entrepreneurialism. We are a broker company. Our premiums and in turn our profits are derived exclusively from our broker relationships. We choose our broker partners carefully from among those most informed in the industry in our product line, because let's be honest;we only partner with the best!
We Are Canadian. When an account is submitted, it is underwritten by our experts here in Canada, not a foreign head office. We underwrite and make decisions based upon an intimate understanding of your marketplace. Our branch network keeps us on top of the challenges and nuances specific to your particular region.
We Are Trisura. Surety is what we do. We underwrite with skill,purpose and urgency. We aspire to be your surety of choice.Five Things You Should Know About Surety
- Surety bonds can free up your client's capital and their credit.
The alternative to buying a bond is often a cash deposit or letter of credit. This freezes that amount of money until your client has honoured their obligation. Bonds,on the other hand, are cash-flow friendly, and helps free up the funds they need to operate.
- You can tell a lot about someone by their friends.
Having a surety facility positions the principal above all those who do not. Having a surety partner means that an independent party has taken a look at your client's operations and is satisfied that they are stable, experienced, and well managed.Securing a surety facility for your client with Trisura places them a step above their competition.
- Everyone can benefit from a surety bond.
Despite the best efforts of the lead constructor, the failure of a sub-contractor can seriously derail a project. Sometimes it is useful for the contractor to ask for bonds from its subcontractors in order to protect itself from subcontractor failure and the inevitable cost overruns that result. This is true for General Contractors that subcontract their work or even prime subcontractors that subcontract portions of their work. Just because no one is asking your client for a bond doesn't mean they can't ask their subtrades for one. It's inexpensive protection that makes good business sense!
Don't forget about Labour and Material Payment Bonds. Subcontractors at any level should ensure the contractor above them has posted a Labour and Material Payment Bond. This vital yet often forgotten security will protect accounts receivable.
- Calling your surety shouldn't be considered bad.
It's in everyone's interest to complete a job on-time and on-budget. If your client finds themselves in a tricky situation, use Trisura as a consultant for input and advice. We have a great cross-section of experience and knowledge on our team. We are at your service as your business partner.
- Not all bonds are created equal.
Not infrequently, an Obligee will specify the use of a particular wording for a surety bond. In some instances, the wording can contain onerous provisions or be so subjective that it could create serious delays or problems when adjusting a claim.The use of such bond wordings should be treated with the same duty of care as the underlying contract a Principal is signing.