Surety Made Simple: Underwriting Character & Capacity

By Will Chapman, Sr. Vice President of Surety Bonding

To determine support levels and terms, a surety will complete an underwriting process for its potential customer or the bond principal (such as a contractor).  Underwriting is the process of assessing the risk or creditworthiness of its potential customer or bond principal.  This process can be simplified into the “Three C’s of Suretyship.”  Sureties will underwrite a contractor’s character, capacity, and capital.  In this article, let’s take a closer look at character and capacity.

Character refers to the contractor’s reputation and history.  The surety is looking for clients that are of “good character.”  Some of the tools used in the underwriting process include credit reports, references, and agency input.  However, the single best way a surety can assess a contractor’s character is by having a relationship through meetings.

Capacity refers to the contractor’s ability to successfully perform its work and execute its contracts.  Some of the tools used in the underwriting process include a review of the following:

• Prior project experience, including largest completed contracts, types of jobs, and typical customers
• PP&E – equipment, machinery, and vehicles
• Personnel and organizational depth, with a focus on the management and leadership team
• Internal controls, processes, and procedures
• How the contractor mitigates its risk

In our next post, we explore the third C of suretyship, capital.  In the meantime, if you have any specific questions about how Seubert could help your business maximize your bonding capacity, reach out to [email protected] or call 412-734-4900 today.

Will Chapman is the Senior Vice President of Seubert’s Surety Bonding operation. He joined the agency in April of 2022 and has more than 18 years of industry experience. In his current role, Will is responsible for business development and nurturing customer relations, department production, and further expanding Seubert’s footprint.