XL Catlin Rounds Out Bond Insurance Product Suite

PRODUCT: Commercial bonds suite

COMPANY: XL Catlin

BEST RATING: A (Excellent)

AVAILABILITY: Coverage is available through XL Catlin-appointed independent agents and brokers.

FOCUS: The cost of capital has a big influence on a business’s ability to grow—and contractual obligations that require letters of credit often tie up capital a business could otherwise use to enhance its operations.

For many businesses, commercial bonds can provide the answer. By replacing letters of credit, cash or short-term investments that secure programs such as performance guarantees, self-insured workers compensation retentions or security required for an appeal or injunction, commercial bonds can free up cash under a company’s credit facility to address other needs.

XL Catlin specializes in commercial bonds and contract bonds for commercial accounts—performance bonds in which the bonding company guarantees to the obligor (public or private owner) that the principal (customer) will perform its contractual obligations per the agreed terms and conditions of the underlying contract.

“We’re looking for solutions for our customers in some cases not just for the bond needs they have today, but also for replacement of letters of credit that might be reducing availability under their bank line,” explains Maria Duhart, head of commercial bonds at XL Catlin. “In those instances, we are looking to replace the letter of credit with a bond, which frees up capital for our customers.”

But Duhart calls the overall product offering “quite vast.” Other types of bonds include supply, customs, license and permit, lost instrument, depository, performance and payment for service providers, subdivision, reclamation, closure/post-closure, workers compensation, utility, and court bonds, including appeal, admiralty, and bankruptcy trustee. Coverage addresses compliance obligations, performance obligations, financial guarantee, court judicial and court fiduciary.

UNDERWRITING: Limits are $100 million single/$250 million aggregate. “In commercial bonds, the strength of our paper is very important,” points out Duhart, who notes that XL Catlin’s listing from the U.S. Department of the Treasury states the company can write a single bond upwards of $200 million. “That differentiates us from other players—the capacity we can provide. Not everybody can get there.”

Insured must provide their three most recent fiscal year-end financial statements, as well as underlying obligation guaranteed by the bond or contract language. Court documents are also required for court bonds.

MINIMUM PREMIUM: $15,000.

TARGET: Public and privately owned Fortune 500 and 1000 companies. “One of our main areas of focus is cross-selling to those same customers we already have on the property-casualty side of the house,” explains Duhart, who notes that XL Catlin already writes about 90% of Fortune 500 companies and 60% of Fortune 1000 companies.

Although XL Catlin will entertain middle-market risks, particularly in the private equity space, “we are not doing small, one-off transactions,” Duhart says. “We are focusing on account-driven business and fostering those relationships.”

Preferred clients include manufacturers, municipal solid waste haulers, service contractors, transportation firms, aviation companies, public utilities, retailers, pharmaceutical companies, energy firms, oilfield services firms, metals mining companies, IT consultants, financial institutions, concessionaires, airport retailers, concrete suppliers, educational services providers, facilities management firms, janitorial services providers, parking services providers, school bus transporters, steel suppliers and towing services providers.

COVERAGE TERRITORY: In addition to writing bonds in the U.S., Canada and Brazil, XL Catlin can also accommodate “reverse flow” bonds, in which the company caters to large global accounts in Europe or Asia that need capacity in the U.S.

CONTACT: Maria Duhart, head of commercial bonds, XL Catlin; 908-673-2544.

Jacquelyn Connelly is IA senior editor.