Several contractors have asked how the surety market will play out in 2011.

The truth? It depends on where you are in your business situation and lifecycle and in your surety relationship.

Most contractors have suffered through several lean years and their reduced balance sheets create unprecedented challenges for surety bond underwriters.  As the sureties adjust to the new reality of reduced revenue and increased claims and losses, we’re seeing them take two different strategies.

The first approach: trying to improve the top line. Some carriers, mainly the smaller, specialty surety-only ones, seem to be hungry for business and more flexible and creative in getting bonds written… at least in their field offices. The only down side is their home offices aren’t always in the same mode.

The second, more conservative approach: protecting and controlling loss expenses.  This strategy is mostly employed by large, multi-line carriers.  They are less willing to take on new customers and more willing to jettison accounts that no longer meet their underwriting criteria. Yet, even these carriers will show some degree of creativity with their existing contractor accounts in securing bonds, using risk-limiting and risk-transfer vehicles (such as joint ventures) to help their customers secure bonded work.

Bottom line? As long as contractors meet certain underwriting requirements relating to balance sheet vs. backlog demand formulas, they’ll have an audience with the surety marketplace.  Those general underwriting requirements:

• Liquidity
• Working Capital and Net Worth to support backlog demands
• Debt Ratios of less than 3 to 1

Unfortunately, many contractors have suffered through several bad years with little to no work, record losses and iffy balance sheets. Now that they see work on the horizon, they’re having trouble getting the required bonds

If this is your story, don’t give up. There are options for stressed contractors, and we can walk you through them.  Now is the time to plan to maximize, establish or re-establish your bondability for 2011. The year-end is upon us and those critical year-end statements will be the factors that determine your next year’s 2011 bond program.

So let’s start planning right now.  Click Here to get started…