Half of sureties see market conditions for contract surety softening later in 2013, but only one surety broker in five agrees that it will happen, according to surveys of both companies and brokers by the National Association of Surety Bond Producers.
The difference in perspective was evident in more ways than one at the NASBP's annual convention in San Francisco on April 21-24. Mark McCallum, NASBP's chief executive, said the association's survey of some 65 companies and individual brokers showed that producers reported rising claims, while the sureties didn't detect an upswing.
A member of the Surety and Fidelity Association of America, an industry group, noted that the bond producers may not have yet noticed an influx of capital into surety underwriters.
The surety business is a building with two wings, one for underwriters and the other for broker-producers. They work closely together, but each segment sees the world from a different perspective.
One difference between sureties and bond producers is a relatively small one that concerns the quality of claims handling. Judged on a scale from one to 10, McCallum told several hundred producers during the convention's general session, sureties rated the industry's claims handling at 6.4, while bond producers rated it exactly one point lower, at 5.4.
Among the more critical comments about claims made in the survey was the belief the "industry has a ways to go" on claims handling, said McCallum. A bond producer said about claims, "I feel completely isolated."
Whether the contractor and bond producer will work together constructively on a claim sometimes hinges on whether a contractor that has defaulted will survive to work another day or whether the company is at the end of the line.
Finding Closure
Timothy Mikolajewski, president of Liberty Mutual Surety, said the sureties' role in a claim may be to "clean up and do the work and move on."
Sometimes the level of optimism is too high, Mikolajewski added. Then, the situation may be one in which a claims company "should be involved and pay the bills and close out and move on."
