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The Surety Dilemma: Finding Certainty in Uncertain Times

As construction projects grow in size and complexity, contractors need reliable and financially strong surety underwriters more than ever. Here’s what to look for.
By: | September 14, 2018 • 4 min read

It’s a transformative time in the property and casualty insurance world: Mergers, acquisitions and a ‘new normal’ in frequency of CAT losses are driving changes in insurer appetites, operating models, and portfolio composition. The construction industry is shifting too: Projects continue to grow in size, complexity and duration.

As a result, just when simplicity, stability and predictability are ever more vital to contractors, circumstances well beyond their control may make long-term certainty in surety relationships, well, uncertain.

“A trusted, reliable surety gives a contractor the means to plan, execute on opportunities, and fulfill obligations with confidence. It’s a lynchpin to growth,” said Mike McKibben, vice president, Surety, Berkshire Hathaway Specialty Insurance.

With a constant undercurrent of change as P&C insurers divest businesses or reboot operations to achieve scale and more acceptable risk profiles, what’s a contractor to do to ensure that its all-important surety relationship is stable now and for the future?

First, realize that surety is a two-way street.

“Just as surety underwriters assess customers’ financial, operational, and executional risks and capabilities, the contractor should perform its own due diligence and be sure the relationship aligns with its needs, expectations, and long-term aspirations. After all, surety is a partnership – and that’s what finding the right partner is all about,” McKibben said.

Following are some questions and attributes to consider when assessing your next moves in the surety marketplace:

1. Does your surety have the capacity and commitment for both immediate and long-term needs?

Mike McKibben, Vice President, Surety, Berkshire Hathaway Specialty Insurance.

Optimally, the surety relationship you forge today will serve you well as your business changes, grows and evolves in the years ahead.

That means thinking big when considering the capacity a potential surety can provide long term — and examining the big picture of where the surety underwriter’s parent company is going as well. Is their focus on customers and long-term relationships?

2. What is the surety’s overall business approach?

With construction projects becoming increasingly complex, the simpler your surety’s business the better.

“Get a sense of how agile they are in responding to your needs. Unique and unusual requests are increasingly common in the surety space,” McKibben said.

For some underwriters, an out-of-the-box circumstance can spur creative discussions. For another, it might necessitate re-underwriting.

3. Who’s doing the underwriting and decision-making?

Relationships come down to people. The individuals building the surety relationship with you should have the experience, knowledge and authority to act on your behalf. At a time when underwriters move around the market, do a gut check: Do your underwriters seem engaged and committed to stay?

4. What about claims?

Assuming claims are handled in-house, the overall business approach of your surety can be a good indicator of what’s to come. The same professionalism, communication, timeliness and transparency you see in underwriting should follow through to claims.

Ask about the claims philosophy.

5. Is it time to consider a co-surety?

“If you have a satisfying surety relationship now, but want to ensure greater capacity is available as you grow or want to hedge against an uncertain marketplace, consider introducing a co-surety,” McKibben said.

Work with your broker to weigh the benefits and assess candidates that complement and expand on your current relationship.

6. Does your surety have the financial strength to be there for you long term?

Some factors used to evaluate an underwriter are subjective. Financial strength is black and white. Measure one potential surety underwriter’s treasury limits and credit rating against another’s.

Against the changing backdrop of today’s P&C industry, making the right surety match is more important than ever. Now is a good time for contractors and brokers to evaluate their current surety relationships and share and set expectations for the future … a future built on a certain and stable surety partner.

To learn more about BHSI’s surety products and services, visit https://bhspecialty.com/us-products/us-surety/.

The information contained herein is for general informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any product or service. Any description set forth herein does not include all policy terms, conditions and exclusions. Please refer to the actual policy for complete details of coverage and exclusions.
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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Berkshire Hathaway Specialty Insurance. The editorial staff of Risk & Insurance had no role in its preparation.




Berkshire Hathaway Specialty Insurance (www.bhspecialty.com) provides commercial property, casualty, healthcare professional liability, executive and professional lines, surety, travel, programs, medical stop loss and homeowners insurance.

More from Risk & Insurance

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In the Fast-Paced World of Retail, This Risk Manager Strives to Mitigate Risks Proactively and Keep Senior Leaders Informed

Janine Kral works to identify and mitigate risks, building strong partnerships with leaders and ensuring they see her as support rather than a blocker. 
By: | October 29, 2018 • 4 min read

R&I: What was your first job?

My very first paid job was working on my uncle’s ranch in British Columbia in the summers. He had cattle, horses and grapes — an unusual combo. But my first real job out of college was as a multi-line claims adjuster at Liberty Mutual.

R&I: How did you come to work in risk management?

Right out of college I applied for a job that turned out to be a claims adjuster at Liberty Mutual. I accepted because they were offering six weeks of training in Southern California, and at the time that sounded really fun. I spent about three years at Liberty Mutual and then I spent a short period of time at a smaller regional insurance company that hired me to start a workers’ compensation claims administration program.

I was hired at Nordstrom as the Washington Region Risk Manager, which was my first job in risk management. When I started at Nordstrom, the risk management department had about five people, and over the years it has grown to about 75. I’ve been vice president for 11 years.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

I would say that technology has probably been the biggest change. When I started many years ago, it was all paper and no RMIS.

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R&I: What risks does the retail industry face that are unique?

We deal with a lot of people — employees and customers. With physical brick and mortar settings, there are the unique exposures with people moving in and out in a public environment. And of course, with ecommerce, we have a lot of customer and employee data, which creates cyber risk — which is not necessarily a unique risk in today’s environment.

R&I: Can you describe your approach to working with senior leaders and front-line staff alike to further risk management initiatives?

It starts with keeping the pulse of what’s happening with the business. Retail moves really fast. In order to identify and mitigate risks proactively, we identify top risk areas and topics, and then we ensure that we have strong partnerships with the leaders responsible for those areas. Trust is critical, ensuring that leaders see us as a support rather than a blocker.

R&I: What role does technology play in your company’s approach to risk management?

Janine Kral, claims adjuster, Nordstrom

We have an internal risk management information system that all of our locations report events into — every type of incident is reported, whether insured or uninsured. Most of these events are managed internally by risk management, and our guidelines require that prevention be analyzed on each one. Having all event data in one system allows us to use the data for trending and also helps us better predict what may happen in the future, and who we need to work with to mitigate risks.

R&I: What advice might you give to students or other aspiring risk managers?

My son is a sophomore in college, and I tell him and his friends all the time not to rule out insurance as a career opportunity. My advice is to cast a wide net and do your homework. Research all the different types of opportunities. Read a lot — articles, industry magazines, LinkedIn. Be proactive and reach out to people you find interesting and ask them about their careers. Don’t be shy and wait for people and opportunities to come to you. Ask questions. Build networks. Be curious and keep an open mind.

R&I: What are your goals for the next five to 10 years of your career?

I have always been passionate about continuous improvement. I want to continue to find ways to add value to my company and to this industry.

R&I: What is your favorite book or movie?

My favorite book is Shantaram by Gregory David Roberts. It’s a true story about a man who was in prison in Australia after being convicted of armed robbery, and he escaped to India. While in India, he passed himself off as a doctor in a slum. It’s a really interesting story, because this is a convicted criminal who ends up helping others. I am not always successful in getting others to read the book because it’s 1,000 pages and definitely a commitment.

R&I: What’s the best restaurant you’ve ever eaten at?

Fiorella’s in Newton, Massachusetts. Great Italian food and a great overall experience.

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R&I: What is your favorite drink?

“Sister Carol.” I have no idea what is in it, and I can only get it at a local bar in Seattle. It’s green but it’s delicious.

R&I: What is the riskiest activity you ever engaged in?

Skydiving. Not tandem and without any sort of communication from the ground. Scary standing on a wing of a plane, but very peaceful once the chute opened, slowly floating down by myself.

R&I: If the world has a modern hero, who is it and why?

I can’t think of one individual person. For me, the real heroes are people who have a positive attitude in the face of adversity. People who are resilient no matter what life brings them.

R&I: What about this work do you find the most fulfilling or rewarding?

It’s rewarding to help solve problems and help people. I am proud of the support that my team provides others. &




Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]