Page 19 - Insurance Times April 2021

B. Claims Trends be liable for the debt, default, or failure of another. It
Claim activity is clearly on the rise. The latest SFAA is a three-party contract by which one party (the surety)
numbers showed a two-point increase in loss ratio from guarantees the performance or obligations of a second
2018. party (the principal) to a third party (the obligee)"
(NASBP, 2020)
Many insurers relate the importance of frequent
communication with claimants to improve claims Figure 2 below contains the description of Surety Bond's
handling. purpose.

Other suggestions for improvements are investing in A surety bond is a three-party agreement where
claims staff, paying proper claims promptly, and creating the surety company assures the obligee (typically
transparency of process. the project owner) that the principal (most often
the contractor) will perform a construction
Besides Agents (Producers) could help, by not taking
contract
bonds from those with a poor history of handling claims.
Surety bonds in construction are referred to as
Market Initiatives of Carriers/Business contract surety bonds.
Strategies Surety bonding is a careful, rigorous, and

Market initiatives are primarily around surety providing professional process in which surety companies
companies to expand their footprint across the world prequalify contractors and then assure project
and meet the growing demand of customers. owners that these contractors are capable of
performing the contract according to its terms
The market players present in surety bond market are and conditions and that they will pay certain
mainly focusing towards product enhancements by
implementing advanced technologies. laborers, subcontractors, and suppliers associated
with the project.
Some strategies include signing partnership, contracts,
joint ventures, funding, and inaugurating new offices Figure 2 - PURPOSE OF SURETY BOND
across the world. There are four types of bonds that serve the different
These permits the company to maintain its brand name purpose namely:
globally. X Contract surety bond: Investors and developers use
this type of surety bond in the construction business
Most of the market initiatives were observed in North as a guarantee that the terms and condition of the
America, and Europe regions, which have high density contract will be fulfilled.
of surety related products and solutions.
X Commercial surety bond : Commercial Surety Bonds
The larger firms are adopting the strategy of acquiring
are required of individuals or businesses by the
and merging with various companies to enhance its
government, legislation or by other entities.
capabilities and expand its footprint in different
geographies. This type of strategy allow the companies X Fidelity surety bond: this is a particular type of
to strengthen its footprint in the market along with its surety bond designed to protect a business owner
brand name. or hiring party from damage or mismanagement
by an employee. Fidelity bonds are typically created
Recent Example: AXA XL announced that it has now to manage long-term relationships and not
merged AXA Corporate Solutions (ACS) and AXA ART into
individual projects.
XL Insurance Company SE (XLICSE).This move was a
follow-on from the acquisition of XL Group by AXA that X Court surety bond - Ensures protection from loss in
was completed all the way back in September 2018. the case of a court proceeding.
(Grzadkowska, January 2020). The most common surety bonds are commercial and
contract surety bond; they serve the purpose of
Product Understanding in Surety Bonds protecting the public and private interests.
Business and Product Trends The court and fidelity surety bonds protect against the
A. Surety Bond - Product Understanding litigation and theft.
According to the NASBP, "A surety bond is a promise to Surety bonds of all types cost a premium based on

The Insurance Times, April 2021 19