Surety Bond Information
Inside this site it is our aim to clarify the confusing world of surety bonds. To many these bonds are a form of insurance that the state, federal, or local government is requiring your company to have in order to operate.
Did you know that Surety Bonds do not act at all like insurance. Surety bonds are underwritten with the intent of no claims being filed (0% loss ratio). Thats right, when a claim is filed the bonding company pays out to the obligee, and then expect repayment from the principle. Perhaps a good place to start is the article showing the differences between surety bonds and irrevocable letters of credit.
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A surety bond is a contract between at least three parties: (i) the principal, (ii) the obligee, and (iii) the surety. Through this agreement, the surety agrees to make the obligee whole (usually by payment of money) if the principal defaults in its performance of its promise to the obligee. The contract is formed so as to induce the obligee to contract with the principal, i.e., to demonstrate the credibility of the principal.
Welcome to a site dedicated to providing information on the world of surety bonds.
