Surety Resources

Your go-to resource for all things Surety.

Organizations

We work closely with industry experts, including these national associations:

Surety Terms

Acronyms and Abbreviations

ABC – Associated Builders and Contractors
National construction industry trade association
AGC – Associated General Contractors of America
Organization of qualified construction contractors and related companies
AIA – American Institute of Architects
Publisher of standard template forms of surety bonds and related contract documents
AM Best – A.M. Best Company
Credit rating agency that rates insurance and surety companies’ financial strength
BLOC – Business or Bank Line of Credit
BMC-84 – Motor Carrier Surety Bond Form
Required $75,000 bond for freight brokers by FMCSA
CFMA – Construction Financial Management Association
Association focused on construction financial management
ERISA – Employee Retirement Income Security Act (1974)
Federal law requiring employee benefit plans to be bonded for protection of plan funds
FAR – Federal Acquisition Regulation
Regulations governing federal procurement, including bond requirements
FMCSA – Federal Motor Carrier Safety Administration
Agency requiring freight broker bonds
GAAP – Generally Accepted Accounting Principles
Standards for accounting adopted by the US SEC and American Institute of CPAs
GC – General Contractor
GIA – General Indemnity Agreement (sometimes GAI)
Contract between principal and surety guaranteeing principal will reimburse surety for any losses
GMP – Guaranteed Maximum Price
Contract type in construction
HELOC – Home Equity Line of Credit
ICISA – International Credit Insurance & Surety Association
ILOC – Irrevocable Letter of Credit
Collateral instrument that cannot be cancelled, sometimes used in lieu of surety bond
LOC – Letter of Credit
Pre-determined amount of credit available; various types including BLOC, HELOC, OLOC, WCLOC
Miller Act – Federal law (40 U.S.C. §§3131-3134)
Requires performance and payment bonds on federal construction projects over $150,000
Little Miller Acts – State-level statutes
State versions of the Miller Act requiring bonds on state/local public works projects
NASBP – National Association of Surety Bond Producers
Association of firms specializing in surety bonding as agents for surety companies
BLOC – Bank Line of Credit
P&L – Profit and Loss Statement
Also called income statement
P3 – Public-Private Partnership
PII – Personally Identifiable Information
RFP – Request for Proposal
Document inviting contractors to submit bids
SBA – Small Business Administration
Has “Office of Surety Guarantees” program to help small/minority businesses obtain bonds
SEC – Securities and Exchange Commission
SFAA – Surety & Fidelity Association of America
Nonprofit trade association representing all segments of surety and fidelity industry (founded 1908)
TIFIA – Transportation Infrastructure Finance and Innovation Act
Federal program for transportation projects now requiring Miller Act bonds
Treasury Circular 570 – Department of Treasury List
Official list of approved surety companies certified to write federal bonds
WCLOC – Working Capital Line of Credit
WIP – Work in Progress
Schedule showing current projects, their status, costs, and profitability

General Surety Terms

Administrator – Person legally vested with right to administer an estate, or fiduciary managing affairs of deceased person without a will.
Admiralty Court – Maritime court hearing cases related to sea, ocean, and shipping laws.
Advance Payment Bond – Guarantees repayment by principal of monies advanced in connection with contract.
Affidavit of Individual Surety – Standard Form 28 used when individual acts as surety.
Aggregate – Total amount of exposure or liability of principal or surety over single or multiple bonds.
Aggregate Liability Clause – Limits surety’s liability to bond penalty regardless of number of claims.
Alcohol Bond – Bond required for sale, manufacture, or warehousing of alcohol (beverage or non-beverage).
Annual Accounting – Presentation to court of estate’s financial activity (fiduciary bonds).
Annual Bond – Bond covering contracts/bids awarded or submitted during annual period or fiscal year.
Appeal Bond (Supersedeas Bond) – Filed by party appealing judgment to stay execution pending appeal to higher court.
Application – Questionnaire collecting information to underwrite risk; includes indemnity agreement and premium payment promise.
Attachment – Legal process of seizing defendant’s property when property is in dispute.
Attorney (Power of Attorney) – Person legally appointed to act as agent; in surety, person authorized to execute bonds on behalf of surety.
Attorney-in-Fact – Individual authorized to execute bonds for surety company.

Bond Types and Terms

Bankruptcy Trustee Bond – Guarantees bonded trustees will perform duties according to court rulings.
Bank Depository Bond – Guarantees deposit of public funds.
Bid Bond (Bid Security) – Guarantees contractor will enter contract if awarded and provide required performance/payment bonds; submitted with contractor’s bid.
Blue Sky Bond – Required of security dealers to indemnify purchasers against loss from false representations.
Bond – Three-party agreement where surety obligates itself to obligee to answer for default of principal.
Bond Amount (Bond Penalty, Penal Sum) – Maximum dollar amount guaranteed by surety; highest amount surety and principal obligated to pay.
Bond Form – Official contract executed by attorney-in-fact outlining key bond information.
Bonding Company – Insurance company serving as surety/guarantor for bond.
Breach – Violating or breaking law, obligation, standard, or contract.
Cancellation Clause – Provision allowing surety to terminate future liability by written notice to obligee.
Cancellation Period – Minimum advance written notice time required before bond cancellation.
Capacity (Bond Capacity) – Maximum bond size surety can provide; also refers to contractor’s capability/experience to perform work.
Capital – Financial resources/net worth of contractor; one of “Three Cs” of underwriting.
Cash Value of Life Insurance – Amount received when liquidating life insurance prior to death (not equal to face value).
Certified Copy – Reproduction of document that authority signs/attests is true, genuine, authentic copy.
Character – Principal’s personal integrity and conscience; one of “Three Cs” of underwriting.
Charge-Off – Negative credit report factor when creditor believes debt unlikely to be collected.
Chattel – Tangible personal property, not real estate.
Claim – Formal notice alleging damages from principal’s bond violation; demand for something believed due.
Claimant’s Bond – Bond when property released to non-party claiming ownership pending final decision.
Closure Bond – Environmental bond guaranteeing landfill/facility closure per regulations.
Coinsurance – Multiple sureties directly participating with joint/several obligations.
Collateral – Assets pledged to secure surety against loss (cash, letter of credit, real estate); security held to reduce risk.
Commercial Blanket Bond (Commercial Blanket Policy) – Fidelity policy covering dishonest acts of all employees to stated amount.
Commercial Bond (Commercial Surety Bond) – Bonds other than contract/performance bonds; typically required by law/regulation for licensing/permitting.
Committee (Conservator, Curator) – Court-appointed person/board managing estate of legally incompetent person.
Completion Bond – Guarantees construction project performance; names city, county, utility, lender, or similar party as obligee.
Conservator – Person, official, or institution designated to protect interests of incompetent or minor.
Contract Bond (Construction Bond) – Guarantees performance of contract obligations; most commonly for construction.
Contract Price – Total sum paid from owner to contractor at final settlement; basis for premium on construction bonds.
Continuity Clause – Assumes liability for losses under prior bond discovered after prior bond’s discovery period expired.
Conversion – Wrongful taking of property entrusted to one’s care.
Corporate Surety – Corporation authorized to act as surety.
Cosigner – Individual/entity joining promissory note execution, becoming jointly liable for borrower’s default.
Co-Surety – One of two+ sureties directly participating in bond with joint/several obligations.
Court Bond (Probate Bond, Judicial Bond) – Bonds required in legal actions; guarantees fiduciary duties and court order compliance.
Credit – Understanding of contractor’s willingness to meet financial obligations; one of “Three Cs”.
Cumulative Liability – Aggregate amount of multiple successive bonds where prior bonds aren’t extinguished.
Damages – Monetary measures of harm in a claim.
Decommissioning Bond – Guarantees land used for wind/solar systems returned to natural state upon completion/abandonment.
Default – Failure to perform bond/contract obligations.
Discovery Bond – Fidelity bond covering dishonest/fraudulent employee acts discovered anytime after bond effective, regardless of when acts occurred.
Dishonesty Insurance – Interchangeable with fidelity bond/policy.
Effective Date – Date when bond coverage becomes effective.
Employee Retirement Income Security Act Bond (ERISA Bond) – Protects employee benefit plans from theft/fraud.
Estimate – Ballpark bond cost provided before reviewing application.
Exoneration – When surety’s obligation toward project/obligee ends.
Face Value of Life Insurance – Amount payable upon insured’s death.
Fidelity Bond – Protects employers from employee dishonesty, theft, fraud.
Fiduciary Bond (Probate Bond) – Court-issued bond to guardian, administrator, trustee guaranteeing trustworthiness.
Financial Statement – Document showing financial position including balance sheet, income statement, cash flow.
Fixed Penalty Bond – Bond with stated, definite dollar amount.
Forfeiture Bond – Full penalty payable upon breach regardless of loss/damage amount.
Forgery – Making/altering document with fraudulent intent; counterfeiting or false signature.
Freight Broker Bond ($75,000 BMC-84) – FMCSA-required bond guaranteeing freight brokers conduct business honestly.
Funds Control – Third party paid to collect contract payments and pay subcontractors/suppliers to reduce surety risk.
Garnishment – Proceeding where defendant’s property in third party’s hands is attached.
General Indemnity Agreement (GIA) – Contract where principal guarantees to reimburse surety for all expenses/losses.
Guardian – Court-appointed person managing estate of minor or incompetent.
Guarantee – Promise to answer for debt/default of another.
Heard Act of 1894 – Predecessor to Miller Act requiring single performance/payment bond.
Income Statement (P&L) – Reports revenues, gains, expenses, losses, net income for time period.
Indemnify/Indemnification – Agreement to restore party to previous financial position and protect against loss.
Individual Surety – Individual acting as surety (not corporation).
Invitation to Bid (ITB) – Request for proposals including scope, location, contract details.
Joint and Several Liability – Each party fully liable for entire obligation.
Lien – Legal claim against property for debt satisfaction.
Line of Credit – Pre-determined credit amount available to borrower.
Liquidated Damages – Pre-designated penalty amount for specific contract breach (e.g., late performance).
Liquidity – Cash and cash resources available to pay short-term obligations.
Litigant – Party to legal action.
Maintenance Bond (Warranty Bond) – Guarantees quality of materials and workmanship for specified period after completion.
Mechanics Lien Bond (Lien Release Bond) – Used after mechanics lien filed; bonds off/discharges lien.
Miscellaneous Bond – Bonds not fitting other well-recognized categories.
Name Schedule Bond – Public official/fidelity bond listing specific names and amounts of each bonded individual.
Net Worth – Total assets minus total liabilities; equity.
Notary Bond (Notary Public Bond) – Protects against losses from improper notary actions.
Obligee – Party to whom surety guarantees principal will perform; protected by bond.
Obligor – Entity for whom debt is made; strictly speaking, both principal and surety.
Omnibus Language – Clause extending indemnity to bonds for applicant’s subsidiaries, affiliates, divisions.
Payment Bond (Labor and Material Payment Bond) – Guarantees contractor pays subcontractors, suppliers, laborers; ensures lien-free project.
Penalty – See Bond Amount.
Performance Bond – Guarantees contractor performs contract terms; protects owner from financial loss if contractor fails to perform.
Personal Surety – Individual who acts as surety.
Plaintiff – Person/institution bringing legal action.
Plaintiff Bond – Guarantees damages to defendant if court decides for defendant.
Power of Attorney – Document authorizing attorney-in-fact to execute bonds on surety’s behalf.
Premium – Fee paid for surety bond; typically 0.5-10% of bond amount.
Prequalification – Process where surety evaluates contractor before awarding bond line.
Principal – Party purchasing bond; person/company performing contracted work and obligated under bond.
Probate Bond – See Court Bond or Fiduciary Bond.
Rate – Percentage of bond amount charged as premium.
Reinsurance – Agreement where portion of surety’s risk transferred to another surety.
Risk – Possibility of financial loss if claim filed and principal unable to repay surety.
Site Improvement Bond – Ensures renovations completed to local municipality specifications.
Statute – Law enacted by legislature.
Statutory Bond – Bond given in compliance with statute; carries liability statute imposes.
Subdivision Bond – Ensures contractor completes subdivision structures (utilities, sidewalks, drainage, sewers) per specifications.
Subrogation – Surety’s right to sue contractor/principals for reimbursement after paying claim.
Supply Bond – Guarantees supplier meets material supply obligations per purchase orders.
Surety – Party guaranteeing principal’s performance; bonding/insurance company issuing bond.
Surety Bond Producer (Agent, Broker) – Professional specializing in arranging surety bonds; intermediary between client and surety.
Supersedeas Bond – See Appeal Bond.
Term – Duration of bond (fixed period or continuous until cancelled).
Three Cs of Underwriting – Character, Capacity, Capital – factors underwriters evaluate.
Treasury Circular 570 – List of approved surety companies certified by US Treasury Department.
Underwriter – Licensed individual trained to assess risk for surety carrier.
Underwriting – Pre-approval evaluation of bond requirements and principal’s financial situation to assess risk.
Underwriting Limit – Maximum bond amount surety can write per Treasury Circular 570.
Utility Bond – Guarantees construction company pays utility bills on time/in full.
Warranty Bond – See Maintenance Bond.
Work in Progress (WIP) – Schedule detailing current projects, their status, costs incurred, and profitability.
Working Capital – Current assets minus current liabilities; measure of liquidity.
Workers Compensation Bond – Guarantees employer compensates injured employees per law (alternative to insurance).