Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses. Current Surety Issues in...
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![Page 1: Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses. Current Surety Issues in Highway Construction August 2, 2011 AASHTO Subcommittee.](https://reader036.fdocuments.in/reader036/viewer/2022082816/56649cff5503460f949d12b6/html5/thumbnails/1.jpg)
Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses.
Current Surety Issues in Highway Construction
August 2, 2011
AASHTO
Subcommittee on Construction
![Page 2: Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses. Current Surety Issues in Highway Construction August 2, 2011 AASHTO Subcommittee.](https://reader036.fdocuments.in/reader036/viewer/2022082816/56649cff5503460f949d12b6/html5/thumbnails/2.jpg)
Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses.
Agenda
• Financial report
• Current issues
• Questions
![Page 3: Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses. Current Surety Issues in Highway Construction August 2, 2011 AASHTO Subcommittee.](https://reader036.fdocuments.in/reader036/viewer/2022082816/56649cff5503460f949d12b6/html5/thumbnails/3.jpg)
Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses.
Financial Report
• Lagging indicator
• Recovery – weak and slow
• GDP growth – nothing to write home about
![Page 4: Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses. Current Surety Issues in Highway Construction August 2, 2011 AASHTO Subcommittee.](https://reader036.fdocuments.in/reader036/viewer/2022082816/56649cff5503460f949d12b6/html5/thumbnails/4.jpg)
Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses.
GDP Growth
![Page 5: Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses. Current Surety Issues in Highway Construction August 2, 2011 AASHTO Subcommittee.](https://reader036.fdocuments.in/reader036/viewer/2022082816/56649cff5503460f949d12b6/html5/thumbnails/5.jpg)
Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses.
Financial Report
• Lagging indicator
• Recovery – weak and slow
• GDP growth – nothing to write home about
• Consumer Confidence Index
• Unemployment – jobs, jobs, jobs
![Page 6: Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses. Current Surety Issues in Highway Construction August 2, 2011 AASHTO Subcommittee.](https://reader036.fdocuments.in/reader036/viewer/2022082816/56649cff5503460f949d12b6/html5/thumbnails/6.jpg)
Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses.
Unemployment Rate
![Page 7: Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses. Current Surety Issues in Highway Construction August 2, 2011 AASHTO Subcommittee.](https://reader036.fdocuments.in/reader036/viewer/2022082816/56649cff5503460f949d12b6/html5/thumbnails/7.jpg)
Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses.
Financial Report
• Lagging indicator• Recovery – weak and slow• GDP growth – nothing to write home about• Consumer Confidence Index• Unemployment – jobs, jobs, jobs• Tight budgets• Construction spending• Not out of the woods yet
![Page 8: Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses. Current Surety Issues in Highway Construction August 2, 2011 AASHTO Subcommittee.](https://reader036.fdocuments.in/reader036/viewer/2022082816/56649cff5503460f949d12b6/html5/thumbnails/8.jpg)
Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses.
Financial Report - Surety
• 2009 loss ratio – 19%
• 2010 loss ratio – 13.2%
![Page 9: Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses. Current Surety Issues in Highway Construction August 2, 2011 AASHTO Subcommittee.](https://reader036.fdocuments.in/reader036/viewer/2022082816/56649cff5503460f949d12b6/html5/thumbnails/9.jpg)
Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses.
Financial Report - Surety
![Page 10: Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses. Current Surety Issues in Highway Construction August 2, 2011 AASHTO Subcommittee.](https://reader036.fdocuments.in/reader036/viewer/2022082816/56649cff5503460f949d12b6/html5/thumbnails/10.jpg)
Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses.
Where are all the losses – the wet blanket
• By no means a hot recovery
• Maintain discipline?
• Beware of the ramp up
![Page 11: Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses. Current Surety Issues in Highway Construction August 2, 2011 AASHTO Subcommittee.](https://reader036.fdocuments.in/reader036/viewer/2022082816/56649cff5503460f949d12b6/html5/thumbnails/11.jpg)
Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses.
Surety Issues
• Waivers/threshold increases– Mentoring and technical assistance program– DOT/SFAA partnership– Bond Education Program
• Workshops
• Readiness
![Page 12: Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses. Current Surety Issues in Highway Construction August 2, 2011 AASHTO Subcommittee.](https://reader036.fdocuments.in/reader036/viewer/2022082816/56649cff5503460f949d12b6/html5/thumbnails/12.jpg)
Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses.
Surety Issues
• Alternative procurement methods– PPP
• Bond requirements
• Size of bond
– Negotiated delivery
![Page 13: Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses. Current Surety Issues in Highway Construction August 2, 2011 AASHTO Subcommittee.](https://reader036.fdocuments.in/reader036/viewer/2022082816/56649cff5503460f949d12b6/html5/thumbnails/13.jpg)
Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses.
Surety Issues
• Mega projects– Capacity to meet need has expanded.– Right project/right contractor– Require largest amount reasonably available
![Page 14: Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses. Current Surety Issues in Highway Construction August 2, 2011 AASHTO Subcommittee.](https://reader036.fdocuments.in/reader036/viewer/2022082816/56649cff5503460f949d12b6/html5/thumbnails/14.jpg)
Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses.
Surety Issues• Long term warranties
– > 5 years– Certainty of judgment is reduced.– Reduced certainty = increased risk– Availability affected– Alternatives
• Reduce term of warranty
• Annual renewable bond
• Exclude from performance bond
![Page 15: Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses. Current Surety Issues in Highway Construction August 2, 2011 AASHTO Subcommittee.](https://reader036.fdocuments.in/reader036/viewer/2022082816/56649cff5503460f949d12b6/html5/thumbnails/15.jpg)
Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses.
Surety Issues
• Onerous bond forms– Short response time– Terms that limit how a surety responds to a
defaults– Automatic increases to the penal sum
![Page 16: Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses. Current Surety Issues in Highway Construction August 2, 2011 AASHTO Subcommittee.](https://reader036.fdocuments.in/reader036/viewer/2022082816/56649cff5503460f949d12b6/html5/thumbnails/16.jpg)
Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses.
Know Your Surety
• Surety is insurance.
• Oversight and regulation is critical.
• Beware of the fraudulent surety.
• Sources of information– SFAA– State insurance agency– Best
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Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses.
Contact Information
• Robert J. Duke
• Director of Underwriting/Assistant Counsel
• The Surety & Fidelity Association of America
• 202-778-3630
![Page 18: Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses. Current Surety Issues in Highway Construction August 2, 2011 AASHTO Subcommittee.](https://reader036.fdocuments.in/reader036/viewer/2022082816/56649cff5503460f949d12b6/html5/thumbnails/18.jpg)
Surety and Fidelity Bonds: Protecting consumers, taxpayers, and businesses.
Questions