Page 31 - Insurance Times April 2021

X If its principal has been properly terminated for
default according to contract terms, surety is
obligated to pay cost to complete the work less the
contract funds still in the owner's hands but subject
to the limit of the bond penalty.

Contractor
X Since surety is guaranteeing the performance of the
contractor, the contractor remains liable to the Figure 12 - Standards orgnaisations indentified use case
surety for any losses caused by the contractor's in USA
failure.
X The surety must be sure not to take action to D. Role of industry Standards in Surety Bond
perform the work unless the contractor actually is Claims Processing:
in default actually is in default.
Processing surety bond claims is a real life and current
example to prove usage of financial data standards to
C. Uniform Data Standards - Will Impact Bond convert the surety bond providers to be more efficient
Producers and their Interactions with Clients and and effective towards delivery of commitments made
Sureties to project owners.
The surety industry, led by the NASBP and SFAA, has The long and detailed process conducted today to
initiated a program to eliminate unnecessary manual extract information like the revenue, cost and profit
data entry, through standards developed by ACORD and data from a WIP report and financials could be reduced
XBRL (USA). to a few minutes through adopted data standards.
These standards will help sureties provide faster
Analysts would have spare bandwidth available to
response times with the most accurate information
review and assess the implications of the numbers,
available.
rather than spending valuable time on data entry.
The standards adoption process has begun in USA by
Standard adoption would ultimately help all parties
the efforts of large standards organizations like ACORD involved:
and XBRL (eXtensible Business Reporting Language) X The principal (contractor) would gain because:
which is set to bring in efficiency in Surety Bond
O His problems are identified and resolved faster.
Management with accuracy of information. Figure 12
below further describes key use cases of standards. O Standards provide accurate information and
thereby the relations he maintains with the
Monitoring process by Surety Bond
obligee as well as the subcontractors and
X Once a Surety Bond provider underwrites (such as suppliers.
the insurer), the financial health of the contractor
X The obligee has the advantage of quick resolution
underwrite a bond is keenly observed and
monitored by the bond provider. There are periodic of his problem resulting in the project moving faster.
reports such as quarterly and half-yearly reports X Subcontractors as well as the suppliers would
including the financial information and work-in- benefit from timely payments.
progress (WIP) report.
X The surety benefits from the elimination of
X The principal is required to submit these WIP inefficiencies caused by manual data processing and
reports to the surety. save his highly skilled staff for higher quality
X Sureties collect WIP reports numbering between analysis.
one to twelve from each contractor/principal every
year. Other Top IT Solution Themes in Surety
X Besides, they collect complete financials from Bond Management
contract and commercial accounts. The top IT solutions to sell and service Surety Bonds are
X Using With use of the free XBRL standard, data can worth observing for the current technology adoption and
be imported instantaneously. (David Hartman, 2019). best practices.

The Insurance Times, April 2021 31