This week’s blog post is from a guest blogger from QBE European Operations. Ainhoa Alzola discusses what life is like as a surety underwriter, and more importantly, what a surety underwriter looks for when writing a bond.

Surety? An instrument that guarantees that a contract is carried out as per its terms and conditions.

Who guarantees it? A surety company (like QBE).

Who is it issued on behalf of? Typically, a construction company.

Who is it in favour of? The construction company’s client (the employer/beneficiary).

Now the FAQs are out of the way, many of you will ask what does a surety underwriter look for when writing a bond? The answers are…

  1. Adequate financial strength to support the bond.
  2. Contractor’s track record in similar projects.
  3. Strong indemnity terms.
  4. Project specific commercial terms in line with previous contracts.
  5. Proposed bond wording that has provisions to protect the contractor and the surety in the event of a claim.

The underwriter seeks to understand what is required under the bond and will advise accordingly.

So, what is a typical day for a surety underwriter? Well, there is no typical day as such…

A working day ranges from dealing with new enquiries from brokers to bond requests from existing clients (either for projects at tender stage or already awarded) to drafting indemnities and initial terms of the facility. All of this requires active interaction with a varied range of stakeholders, including law firms.

In some instances, a surety underwriter may require legal input, for example, when a bond wording may not be standard or the obligations under the bond are of a difficult nature; alternatively if there is a complex corporate structure when negotiating an indemnity.

Legal advice may be useful to mitigate some of the key risks, protecting both the surety and the contractor.

With market conditions becoming more sophisticated, less linear project structures and more multidisciplined input from legal firms is becoming essential.

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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.