bid bonds

It’s SO HOT!

Record heat is being recorded in many parts of the country.  But what else is hot?

  1. Floyd Mayweather – Hot earner made $7.6 million per minute for his fight with Connor McGregor
  2. Stephen Curry – Hot contract, NBA’s first for over $200 million
  3. Timothy Berners – Lee (never heard of him?) Inventor of the world-wide web and creator of the first web site. He changed everything. Very hot.
  4. Surety Bonds by KIS – Exclusive national underwriters for Great Midwest Insurance Company!
  5. Bill and Melinda Gates – Hot philanthropists donated $4.78 Billion in 2017. (Don’t worry, they kept some for themselves.)

What was that number 4, Surety Bonds?! Come on!  How can they be hot?

Glad you asked:

Surety bonds are a special area of the business.  They are unique and difficult, an opportunity and sometimes an obstacle.  But they are always a chance to shine: A path to greater success for you and your clients.  All you need… is a way to get there.

What if the surety underwriters were cooperative and production oriented?

Wouldn’t THAT be hot?

You need to ask yourself

  • Do my underwriters promise a same day response?
  • Do they help me find a way to write the business?
  • Are they open to a wide range of underwriting situations?
  • Are they Problem Solvers?

If not, you need to heat up your surety bond production.  Find out why agents bring their big / tough contract surety bonds to KIS Surety, exclusive national underwriters for Great Midwest Insurance Company, an A-8 rated corporate surety specializing in bid, performance and payment bonds for contractors.

Same day response.  Bonds up to $10 million.  Flexible and creative.  THAT’S HOT!

We can help you solve your next contract surety need. KIS Surety   Call us! 856-304-7348

Our Surety Agents Look Good

* Tuesday 6/19/18: We received an urgent submission.  A new client needed a $1 million final bond. We reviewed the file immediately and sent back our “road map to success.”

Complicating factors:

  • New file.  Short fuse.  All the basic analysis, credit reports, financial evaluation, indemnity agreement, etc. were needed.
  • Another surety had issued a bid bond, but because of unexpected developments, was unable to provide the final bond
  • There was a bid spread
  • The job specifications needed clarification regarding the surety obligation and possible requirement for a maintenance bond
  • Company year-end FS was a draft
  • Analysis regarding the collection of FYE Receivables was needed
  • Two other sureties reviewed this opportunity, causing the clock to run down for the client

* Wednesday 6/20: Agent provided additional info.

* Thursday 6/21: An engineering evaluation of the project was completed, including the adequacy of price.  Wednesday evening and Thursday, the underwriting review was completed. Bond is approved!

*Friday 6/22: Bond is issued and in the hands of the agent and contractor.

Actual agent comment: “Thanks so much!  Great job!”

Making our agents look good.  That’s what we do.

We are the national contract bond underwriting department for Great Midwest Insurance Company, a corporate surety with an A-8 rating.  We can help you solve your next contract surety need. KIS Surety   Call 856-304-7348

Bucket List: Update

Great news!!  Today you can check off one more item from your Bucket List!

Current Bucket List:

  1. Learn to bartend like Tom Cruise in “Cocktail”
  2. Visit Abbey Road in London and re-create The Beatles’ cover
  3. Hug Mickey Mouse
  4. Write my name in wet cement
  5. Bury a time capsule
  6. Ride a Vespa
  7. Find a Bonding Company as Good as I Want
  8. Make a tie dye shirt
  9. Be the house on the block with the most Christmas lights
  10. Try every cheesecake at The Cheesecake Factory

Today you can finally check off #7: “Find a Bonding Company as Good as I Want” There are two big questions and we will answer them now.

First Question

What do you want from a bonding company? They must have capacity.  If the company is too small, they can only write tiny bonds.  They are of little use to Surety Bond Agents and their Contractor clients.

Good credentials.  The bonds must be widely accepted so contractors can use them on various contracts, in any state.

Flexible underwriting.  The process of getting the bond approved must be willing and aggressive, like the underwriters actually want to write the bond.

Speed.  You can’t wait forever for an answer.  How long should it take the underwriter to respond?  Basically, your Bucket List surety will give you a same day response.

Second Question

Exactly who is this extra special, wonderful bonding company? #7 is Great Midwest Insurance Company! (GMIC) Never heard of us?  We are part of Houston International Insurance Group an “Excellent” rated company in the $250 million plus category.

GMIC is a provider of contract surety bonds (bid, performance, payment) that is licensed in every state.  This corporate surety uses a flexible underwriting style that may support clients that were declined under more traditional underwriting methods.

Bonds are provided up to $10 million each with surety programs up to $15 million.

What about speed? The GMIC surety program is available exclusively through an MGU provided by KIS Surety Bonds. Our underwriting expertise originated in the early 70’s!  We have lots of experience solving problems for our clients efficiently and with a same day response.

Hooray!  You nailed #7.  When you need the next bid or performance bond call us: 856-304-7348. KIS Surety, MGU.

Now, here is a link to help you with #1: Click!

Security Solutions!

If you have read my (numerous!) surety articles online, you may think bonds are the only thing I care about.  While this is true, I do have ideas on other subjects and here is one that has me worried: Cyber Security.

The threats are all around us: Phishing, hacking, denial of service attacks, viruses, identity theft and credit card fraud.  It is obvious that the bad guys will never let up, never stop looking for ways to take advantage of people – unless we do something dramatic to thwart them forever.

So here they are, solutions that are inexpensive or FREE! that will help protect you, your privacy and your assets.

Protect Your Data

Do you trust the “cloud”?  What if they lose your data, sell it or they get hacked?! Here is a solution that will protect your passwords, account numbers and other valuable info, prevent all internet and email scams and assure that you have complete access to all your info, all the time.

This solution is portable and permanent, and the total cost is (you’re gonna love this): $1.79 at Staples. 

This security solution is called a “Pocket Notepad.”  Here’s how it works:

You write down all your important stuff, then you put the notepad in your pocket. 

THAT’S IT!  No hacking, no phishing, and you can take it with you when you go fishing. Totally portable!

Credit Card Fraud

So many ways for thieves to get your info.  They use skimmers to read your data. There is malware, web scams and picking through your trash.

Here is a security solution that will prevent all unauthorized use of you credit / debit cards – and this one is Free!  This solution is called “Cash.”

Cash is paper money and coins issued by the government.  You can use it to buy anything, and it is accepted everywhere.  Pay with Cash and never worry again about unauthorized access to your account.

Privacy

Facebook and other social network platforms gather your info – then what?  There is no way to predict who may have access and then misuse it.

Our final security solution is another Free one!  This will absolutely protect your info from misuse or attack on the internet.  You will still have the ability to pursue new relationships and maintain current friendships as you do with your current social media.

In fact, this solution goes even further! It enables an enhanced level of communication where you can see the individual in real time, and actually touch them!!!  It is called “Talking.”  You talk to the person, they answer you and (get this) they are right in the room with you!!!  Insane!

This is actually a very old concept that has been used successfully for thousands of years.  It is tried and proven – and it could work for you.

So there you have them, three great inexpensive / free solutions to the cyber threats we face.  Technology is the cause of the problem, and it may not be the cure.  With this article, we invite you to consider the following:

  1. You may not find the solution to every problem in your cell phone. I admit they are cool and do a lot – more every day.  But sometimes “old school” is better.  Try giving it a chance occasionally.
  2. You think all Bond People are boring? We’re not!  We love to use our knowledge and creativity to solve bonding problems. Our underwriting staff has many (many, many) years of contract surety expertise.  When you call needing a bid or performance bond up to $10 million, our greatest joy is to be the solution you were looking for.  Keep this number in your new $1.79 Notepad: 856-304-7348.

We are the national contract bond underwriting department for Great Midwest Insurance Company, a corporate surety with an A-8 rating.  We can help you solve your next contract surety need. KIS Surety 

(Don’t miss our next exciting article.  Click the “Follow” button at the top right.)

Secrets of Bonding #160: Deep in the Weeds with Set Aside Letters

In this article we will peel back the onion on Set Aside Letters (SAL) issued by banks in connection with construction loans.  What are they, when they are useful for bonding companies and when are they not?

Here is the essence of such documents:

“The agreement covering the project will provide that the funds in said impound account are … to be disbursed for payment of the (Name of Project) mentioned above and only after (Bank) has satisfied itself that the work paid for has actually been performed… In the event (Borrower) fails to complete the project described herein… all funds remaining in said impound account shall be immediately available to Surety to complete and pay the costs of said project, and in such event, (Borrower) waives any claim or interest in the remaining funds. Surety shall not in any way be obligated to repay said funds so used to (Bank).

This is an irrevocable commitment of funds which is not subject to recall or offset by (Bank).”

Pretty interesting!  This letter / agreement keeps the loan in play to fund the completion of the project  – even if the borrower (bank customer) fails / defaults.

When Are Set Aside Letters Used?

These documents are a common underwriting tool when a Site or Subdivision Bond is issued by a surety. If the bond applicant (who is also the developer and borrower) is relying on a construction loan to fund the bonded work, the SAL protects the surety by providing funds for the completion of the work in the event of a default.

What a great idea.  So why don’t we use these on everything?  Let’s look at another example.

Commercial Projects

The project owner hires a bonded contractor and a bank loan will fund the project.  The bank needs a guarantee that the asset / project (which backs the loan) will be built as intended.  A Performance and Payment Bond accomplishes this and assures there will be no Mechanics Liens against the property for unpaid bills.  These two aspects benefit the project owner and the lender.  Keep in mind, in a borrower default situation, the bank becomes the new owner of the property.

It is common for the bank to stipulate that a bonded contractor be used, and they may want to be a named beneficiary on the P&P bond – accomplished by issuing a Dual Obligee Rider.  In turn, should the underwriter require a SAL from the lender?

On Commercial projects, the normal practice is to NOT obtain a SAL from the lender.  Why not?  Why is this different?

Choose one:

a. The bank is a secured lender

b. The bank can subrogate against the borrower’s assets

c. The Dual Obligee Rider serves a purpose similar to the SAL

a. and b. are true, but the answer is c.

Welcome to the Weeds

We’re going in now. The Dual Obligee Rider adds the lender as a beneficiary with all the rights and obligations of the obligee named on the bond (the project owner).  And what are they?  Obviously they are entitled to make a performance claim and have the project delivered as indicated in the contract.

The named obligee also has obligations, one of the most primary is to PAY the builder. Important: The obligee is prohibited from making a performance claim if they have failed to pay the contractor.

Therefore, when the bank is included under a Dual Obligee Rider, they accept the benefits and obligations.  If the borrower defaults, the lender cannot make a bond claim unless they continue to pay the construction loan to the surety.  (Now the bank owns the project and the surety has become the contractor.)

Summary

Is this starting to make sense?  When a borrower defaults on a commercial project, a lender included by Dual Obligee Rider cannot make a claim unless they continue to pay the project funds to the surety.

Deeper Weeds

On Site and Subdivision there is a unique risk – the lender can take a free ride on the surety by having the bonding company pay out of pocket to complete the project.

Site and Sub-D bonds have the local municipality as obligee, not the bank.  The bank doesn’t want a Dual Obligee Rider because they automatically receive a financial benefit if the municipality makes a bond claim to demand completion of the project.  If the borrower has defaulted, the bank has the opportunity to withhold the balance of the loan (the borrower is gone), and watch the surety pay to complete a project they now own.  And they were not even the bond claimant…

This is the risk sureties avoid on Site and Subdivision Bonds by requiring the SAL that keeps the loan in play, even if the bond applicant / borrower has failed.

Admittedly, this is a pretty obscure subject, but also interesting to us “bond nerds.”  It never hurts to understand how things fit together.  These skills help us solve your complicated bond opportunities.  Take advantage of our expertise when the next one pops up.

KIS Surety is the national contract bond underwriting department for Great Midwest Insurance Company, a national, corporate surety with an A-8 rating.  We throw all this underwriting talent at your bond opportunities and support contracts up to $10,000,000.

If you have a contract surety case that needs a fast, creative response, call us: 856-304-7348

(Don’t miss our next exciting article.  Click the “Follow” button at the top right.)

 

Secrets of Bonding #159: Beware the False Asker

Surety Bond Producers have one main goal: produce the business and move on.

You know there is a process when submitting a surety bond for approval but hate that sick feeling when the underwriter comes back with a ton of questions.  Let’s face it, customers just want to complete the transaction and get on with their lives.  They have more important things to do than fill out forms, scan documents and complete applications.  You know you’ll get push back if you bug them.  

What’s more, the questions may result in a dead end, a declination!  Did the underwriter already form an opinion?  Did they already decide the account is not for them, but just want to complete the file… to have a complete file?

We will call such a person the “False Asker” – an underwriter who puts you through the paces, just to say no at the end.  They never really wanted to write the bond and are developing the file under false pretenses.  They send you on a fools mission.  It is 100% a waste of your time!

Or just maybe, questions are the opposite…  The bond underwriter thinks the account may be a fit, but just needs to check a few more points.  This could be the first step on a successful journey. Here’s more: There may be something wonderful about the questions good underwriters ask.  Let’s explore.

When reviewing the file, the analyst marks off elements of strength and weakness.  For example, the company is 10 years old, but current management has only been in place for a year (a plus and a minus).  Or maybe the net worth is strong, but debt is high resulting in too much leverage.  If there is more good than bad, an approval may be in order – after additional development. 

Now comes the gift: The key points, the underwriting questions, are an insight to the decision making process.  They are keys to the underwriter’s mind.  With favorable answers, authorization may ensue. The questions chart a course that the producer could imagine but not confirm.  In this manner, the underwriting questions are priceless, the keys to success.

Remember, there is room for frustration on the underwriter’s side, too.

Q. Which of the underwriting questions are optional? You know, the unimportant ones?

A. They are all important.

Sometimes we ask 5 Q’s and get back 3 A’s.  Then re-ask the 3 and get back only 2.  It’s like beating your head against the wall…

It all comes down to this:  Beware the False Asker.  You must avoid that person who churns the file and wastes your time.  Every producer has been through it.  You answer questions for two weeks and get a declination they could have figured on day one – and not wasted your time.

A good underwriter only develops an account they intend to support.  They like it and want to proceed, but must tidy up the file. Their Qs are a gift, the path forward, the key to your success if you follow through willingly and diligently.

Judge all of us by our performance:

  • Good underwriters are prompt. For example, our office provides a same day response on all submissions.
  • Are our responses concise and easy to understand?
  • Do we offer a prompt declination or clear path forward, defined by the underwriting questions that will get the deal done?

A good surety underwriter can be your important ally and business partner.  Choose us carefully based on performance, and always Beware the False Asker!

KIS Surety is the national contract bond underwriting department for Great Midwest Insurance Company, a national, corporate surety with an A-8 rating.  We throw all this underwriting talent at your bond opportunities and support contracts up to $10,000,000. 

If you have a contract surety case that needs a fast, creative response, call us: 856-304-7348

(Don’t miss our next exciting article.  Click the “Follow” button at the top right.)

Secrets of Bonding #154: Be A Bean Counter (The Importance of Bid Results)

It’s not sexy.  Nobody has it on their business cards.  It may not be in your “official” job description.  But this article is the start of your new vocation as an official Bean Counter!

A major area of surety bonding is “Contract Surety.”  This refers to bid and performance bonds for construction contracts.  When we set up a new account, an amount of bonding capacity is established and the individual bond requests are processed within that line.  It is possible for a client to use up the full capacity of their line, then our underwriting department could consider granting an exception to support additional work.

Efficient management of the line can minimize instances where an exception is needed.  Here’s where the bean counting comes in.

We manage bonding capacity the way a bank runs a credit line.  A series of individual transactions (bonds) can equal the full capacity amount (referred to as the “aggregate”).  Bank credit lines work the same way.  For the bond or bank customer, it is advantageous to maximize the available credit.  Prompt reporting of bid results helps accomplish this objective.

Advantages Of Reporting Bid Results Promptly

  • When a bid bond is approved / issued, the underwriter debits the amount against the aggregate capacity. However, the full contract amount is used, not the dollar value of the bid bond.  For example, a 10% bid bond for $100,000 actually uses $1 million of aggregate capacity.  Therefore, when it is known that the bid is not likely to result in a contract award (the client is not “apparent low bidder”), this fact should be reported so we can restore the capacity.
  • Detailed bid results are needed on low bids in order to process final bonds. Example: Our guy has a low bid for $5,000,000. The second bidder is at $5,400,000.  Third bidder submitted $5,550,000. Because our bid is less than 10% below the second bidder, the adequacy of the contract amount is supported.  If our client is more than 10% below the second bidder, there will be an additional evaluation before proceeding with the P&P bond.
  • Bid Spreads – in cases where the bid spread is excessive, it is important to have a prompt discussion with us. If there is a bid calculation error, and the contract price is inadequate, there is a limited amount of time to withdraw the bid without penalty (such as a bid bond default / claim).  Learn more about bid spreads:  Click!
  • Low bids may be for lesser amounts than the original bid approval. Example: We approve a bid for an estimated contract amount of $9 million, but the actual bid goes in at $8,500,000 due to last minute changes and reductions. Therefore, when the low bid results are reported, $500,000 in capacity is restored to the aggregate.
  • Postponements – sometimes bids are postponed at the last minute, with no immediate reschedule date. The bid approval may never be used. If it dies on the vine we will restore the capacity immediately.
  • Withdrawal – clients may decide not to bid a project after ordering the bid bond. They may have determined that the plans are unclear or unacceptable.  Advise us so capacity can be restored.

If you are now sufficiently impressed with the importance of minding these small details, you may don your green eye shade and declare yourself an Official Bean Counter.  It’s not glamorous, but it is necessary for proper management of the bond account.  (Actually, we think it is glamorous!)

~ ~ ~

KIS Surety Bonds, LLC is the exclusive underwriting department for Great Midwest Insurance Company an A – 8 carrier licensed in all states plus D.C.  

We have in-house authority for Bid and Performance Bonds up to $10 million each.

Contact us for creative solutions and a same day response: 856-304-7348.

(Follow this blog.  Never miss an exciting article!  Top right.)