The Bond program on Big “I” Markets has provided a solution for your fellow agents to solve the bonding needs of their clients without expertise in the coverage. The Big “I” recently invited agents to ask any question they have pertaining to bonds for company partner Goldleaf Surety Services to answer. Below are some of the questions and answers already received. If you have any questions to add, send them to Aimee Fawns (aimee.fawns@iiaba.net) for a prompt reply.
I’m looking for a market for a “stand alone” employee fidelity bond for a not-for-profit foundation. Do you have a resource for this?
Goldleaf has good surety markets that write these bonds. Of course, as with all surety bonds, the terms for placement of this type of bond depends on the applicant’s creditworthiness—but market access certainly is not an issue.
What is the percentage amount of a bond needed in N.J. for an ERISA bond?
ERISA (Employee Retirement and Income Security Act) bonds or pension trust bonds are designed to protect your pension programs. An appointed person manages the plans and oversees the programs. These bonds are to protect the money in the plans against fraud and dishonest acts by the appointed person. ERISA and pension trust bonds are also required by the Pension Reform Act of 1974. ERISA states that all funds of profit-sharing or pension plans must be bonded for 10% of the funds handled. According to the Act, the amount of coverage necessary for each plan is equal to no less than 10% of the amount of plan funds handled, subject to a $500,000 maximum bond amount.
We have several contractor clients and have generally stayed away from surety, [often] from a lack of confidence. I have 20 years of construction finance experience and have attended level one William Angle surety school. Are there any online or other training courses we can send personnel to, and can the Big “I” assist with placement?
Surety bonds not only focus on the financials but also focus on the liability inherent to the contract/RFP. Due to the numerous complexities associated with bonding, this is an area where it is difficult for an insurance agent to just handle a few accounts. The risk far exceeds the benefit. This is the reason the Big “I” partnered with Goldleaf to assist agents with their bond needs. Goldleaf will be your in-house bonding expertise needed to properly handle the bond needs of your customers; the company will provide the expertise needed to help them grow and become more knowledgeable on bonding. Through the assistance provided by Goldleaf to your accounts, you will learn more about bonding and will hopefully become somewhat comfortable talking about bonding.
I’m in need of a wage and welfare bond for $10,000 for a commercial lines plumbing company [that] is unable to provide collateral of any type. Can you help?
Unfortunately, union benefit (wage & welfare) bonds are very tough to get written without collateral. There usually is a choice between a low rate and 100% collateral, and a high rate and some percentage of collateral. Since these are straight “payment guaranty bonds,” they are considered to be among the highest risk classes of bonds in the surety industry, and only applicants with a very strong financial position and a very liquid cash/credit position are able to qualify for these bonds without collateral. In other words, these bonds usually are cost effective only for the strongest applicants.
Also, some unions have very adverse forms for these bonds, making it difficult—and in some cases, impossible—to get a surety company to write them. We often encourage clients to see if they have any alternatives to the bond. Sometimes, the union will allow them to put up security directly on this type of obligation—cash, bank letter of credit, assignment of a certificate of deposit, etc. If collateral is going to be required on the bond, these alternatives would be quicker and cheaper than a bond if available under the union’s rules.
To access the bond program, log on to www.bigimarkets.com.