Volume 39, Issue 2,
A Sure Thing? Glazing Contractors
Struggle to Gain Surety Bonding
As bonding companies have become more scrutinous in recent years, gaining surety has become increasingly difficult for glazing contractors. According to Robert Duke, director of underwriting for the Surety Association of America, from about 2000 to 2002 the surety industry saw an increase in loss ratios and underwriting loss.
“Generally, the loss ratio runs in the 20-percent to 30-percent range,” said Duke. And while the 2003 year-end results are not yet available, Duke expects to see a higher than usual loss ratio.
According to Duke, during the construction boom of the late 1990s, the surety industry was also doing well and relatively few losses were incurred.
“When the construction industry was more profitable [bonding companies] were more lenient on underwriting,” Duke said. “When the construction industry was doing well, so was the surety industry and that’s when we saw the easing of underwriting conditions.”
And with the easing of underwriting conditions, in some cases, sureties found they had bonded companies that weren’t financially stable.
“Many companies have gone bust and left the bonding company holding the bag,” said John Neunlist, president of Admiral Glass in Houston. “[Whether or not a company is successful at getting a project bonded] typically depends on the company’s financial strength. If you’re not up to snuff financially, no one wants to give you a bond.”
So where does this leave the glazier?
“Subcontractors need to be aware of the greater underwriting scrutiny and they need to expect to have to respond to more questions about their operations or the project they are asking to bond,” said Duke.
Neunlist agreed. “Bonding companies are very cautious. They want to know you’re going to be in business to finish the job.”
Though it may be difficult to ensure a bond, there are steps and precautions glazing companies can follow.
“Especially in these times, it’s important to maintain a good relationship with the surety company and provide the required information,” said Duke. “A lack of information in these times can impact the bonding company’s decision as to whether to bond the next project.”
Neunlist stressed the importance of operating a financially strong business.
“For new companies, unless they have a lot of financial backing, it’s almost impossible to get a bond,” he said. “You also need a good track record so the surety can check [your history] to see that you can do the job.” Other advice Neunlist offered included maintaining a portfolio that shows how long you’ve been in business and having financial statements that show you’re making money.
“If you don’t make money,” he said, “they don’t want you.”
|CSI Completes Content Development for MasterFormat™ 2004
The Construction Specifications Institute (CSI) has announced it has completed major content development for its 2004 edition of MasterFormat, its specifications-writing standard for North American nonresidential building design and construction projects.
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