Surety is not insurance. It is more closely related to the commercial lending practice of financial institutions. As such, it needs to satisfy itself that the party they are bonding has the experience, financial and capital resources necessary to perform their obligations. Further, if called to pay out under a bond, it will seek recovery for their losses under an indemnity agreement or other security typically taken at the start of the relationship.
A surety bond is a guarantee of performance of an obligation. The bond itself gives rise to a three-party relationship where the Surety agrees to fulfil the obligations of the Principal (the ‘insured’ or bonded party) to the Obligee (the beneficiary of the bond), in the event the Principal is unable to do so. The Surety stands behind the Principal as a guarantor or ‘co-signer’. The Surety typically does not become involved unless the Principal is in legitimate default of their obligations to the Obligee, at which point a claim is made under the bond and the Surety steps in to remedy the failure to perform.
Obligations of almost any nature can conceivably be bonded, however, the mainstream use of this product can be classed into two main types:
Bonds which are required to satisfy or guarantee fiduciary obligations, governmental legislation, as well as private contractual obligations of the applicant or the Principal under the bond. Bonds sold to companies and individuals in order to satisfy government regulations and court orders, or to replace lost documents such as share certificates. Commercial Surety Products include bonds which respond to federal and/or provincial statutes and regulations. They are usually part of licensing processes and requirements for companies or individuals. Commercial Surety Bonds protect the consumer against fraud, misrepresentation, and compensation of monetary loss and are typically required by federal and/or provincial courts, government bodies, financial institutions, and private corporations.
Contract Surety Bonds guarantee the contractual obligations of a contracting entity (the “Contractor”) to the purchaser of their services (the “Owner”). In most circumstances these bonds are required by the Owner as part of the Contractor’s contract terms and conditions.
Binks does business with several Surety Companies which offer contract surety facilities primarily to construction companies, service contractors, suppliers and manufacturers for:
Bids and Tenders – There are commonly two types of bonds that contractors are required to post when bidding work:
Final Contract Security — There are commonly two type of bonds that contractors are required to post as security for their contractual obligations:
Accounts are typically underwritten with a view to establishing surety facilities to support a contractor’s long term bonding needs. Nonetheless, we will consider ‘one shot’ deals for single use bond requirements.