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Surety Today: Investigating a Contractor’s Character with N-Surety’s Underwriting and Analytics Capability

The three pillars of surety underwriting are character, capital, and capacity. These “3 Cs” have been the basis for evaluating bond creditworthiness for decades, and they remain so today. The manner that underwriters evaluate the principal’s capital and capacity for work has become more sophisticated as new technological tools are developed. Technology has been a positive influence in these areas, but how do we evaluate the intangible nuances of character in today’s electronically driven environment?


For decades, bond producers met with all clients on a regular basis to gather information and to deliver the executed bonds. Likewise, the bond producers and surety underwriters met regularly to exchange underwriting papers, review information, and discuss the state of the local market.

Bond producers knew their markets well, particularly the local construction contractors, and they advised their clients and surety partners accordingly. With email, texts, cell phones, and the overall ease of communicating and transmitting information, there are too few face-to-face meetings today. Producers and underwriters have lost the benefit they had in evaluating character when surety was a relationship business.

There is no substitute for having a long-standing relationship when evaluating character as part of the underwriting process. In fact, I have seen some bad claim situations where the contractor was a new client of both the bond producer and the surety. The question is how to properly underwrite character today when there is no long-standing relationship.

Sureties typically rely on third-party credit reports, reference checks, and bank verifications to investigate a contractor. Each of these can provide insight to character. The biggest underwriting mistake I have seen is an underwriter acquiring the information but not following up on red flags or unusual comments in the reports. Simply getting the information is not enough; it must be reviewed and weighed. It is also important to request credit reports on all related entities, including prior companies owned or managed by the current construction team.

Technology must fill the gap left in the underwriting when the underwriter does not know the individuals or companies and a face-to-face meeting is not feasible. While few simple Internet searches may tell you about the people involved and their background, does this truly provide the detail needed to evaluate character, such as credit worthiness, quality of workmanship, personal ethics, etc.?

I’ve had a chance to work with NIIT Tech on its N-Surety platform, which provides a technology solution that helps the surety underwriter to develop a solid profile of the contractor’s character and risk assessment. Additionally, NIIT Tech offers companion technologies, such as social media and analytics under the brand name Digital Foresight ®, which can be integrated with N-Surety in furtherance of the risk evaluation.

Digital Foresight® is as a cloud-based enablement tool that can harvest an extraordinary quantity of information and fuse it seamlessly to a gain real-time understanding of risk. It monitors client’s habits, preferences, life events, behavior, and opinions that can predict future customer behavior.

Successful bond approvals require the surety underwriter to use all tools available to best understand the character of the customers and their projects being bonded.


Learn more about N-Surety, and get the Mary Jeanne Anderson’s perspective on the current state of surety. View the recording of our N-Surety webinar and demo now.

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