Assignment 3- Underwriting Commercial
Surety and Fidelity Bonds
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Students also studied
AFSB 151 AFSB 153 - Practice Exam Questions... AFSB 151 Simulated Exam CPCU 5
116 terms 84 terms 50 terms 83 terms
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Surety The party (usually an insurer) to a surety bond that guarantees to the obligee that
the principal will fulfill an obligation or perform as required by the underlying
contract, permit, or law.
Field Underwriting Activities - Selecting insureds
- Classifying risks
- Determining proper coverage
- Determining the appropriate rate or price
- Providing service to producers and policyholders
Home Office Underwriting Activities - Formulating underwriting policy
- Evaluating experience
- Researching and developing coverages and policy forms
- Reviewing and revising rating plans
- Preparing underwriting guides and bulletins
- Conducting underwriting audits
- Participating in industry associations and advisory organizations
- Conducting education and training
Why is bond underwriting one of the most challenging Because underwriters within it perform extensive financial and credit analysis;
underwriting fields? which are the basis of bond underwriting.
How do you think bond underwriting differs from Differences between the two relate to bond forms and the three-party surety
insurance underwriting? arrangement.
A plumber's license and permit bond is a statutory bond Guaranteeing that the plumber's work will conform to local statues.
A performance bond for contract surety Requires the builder to complete construction per the contract that it has entered
into with an owner.
, A lease bond can Guarantee that the lessee will pay rent regularly. It may also cover the other terms
of the lease, such as turning over improvements to the property at expiration and
even reimbursing the lessor for tax losses under certain circumstances.
What should an underwriter do if the language of a bond The underwriter should consult with senior members of the underwriting
or an associated document is not clear and they're department or with the surety's claims attorneys. Attorneys can help modify the
concerned about an exposure? bond language to ensure accurate exclusion or inclusion of provisions.
Bond forms in regards to insurance The various forms compiled when crafting insurance policies are typically filed
with and approved by insurance departments in each form's issuing state.
Insurance underwriters must choose from these existing forms and do not alter
them.
Bond forms in regards to sureties Sureties have certain standard forms, but do not file bond forms. Some bond
forms are statutory, some obligees or courts prescribe the form they will accept,
and some sureties draft bond forms to cover unique circumstances or exclude
specific elements. Furthermore, a bond may incorporate statutes or other legal
documents by reference, thus extending the obligation beyond the language of
the bond form itself.
How many parties does a surety invovle? Three parties (the obligee, principal, and surety)
How many parties does insurance involve? Two parties (the insured and insurer)
What is the main role of field underwriters? To evaluate individual applicants.
What is the main role of home office underwriters? To set and implement underwriting policy.
What are the main two differences between surety and Unlike insurance underwriters, sureties do not file bond forms, and surety involves
insurance underwriting? three parties, while insurance involves two.
What document is critical for sureties to do business? Indemnity agreements
Subjective factors Form a catchall category for an underwriter's personal assessment of a principal's
character. The underwriter must develop a personal (subjective) method for
judging whether the applicant shows satisfactory evidence of good character.
Financial reports Reveal an applicant's financial condition and reflect the applicant's overall
management ability. The applicant's care in preparation of reports; the
management attitudes that the reports reveal; and the details they provide about
the applicant's use of assets, debt management, and capital formation convey a
great deal about the applicant.
Why do most underwriters require professionally Because financial analysis plays a crucial role in underwriting unsecured surety
prepared financial statements for bond or bond credit obligations.
programs of significant size?
As the size and complexity of an account's bonds So will the need for careful financial analysis by the underwriter.
increase,
Surety and Fidelity Bonds
Save
Students also studied
AFSB 151 AFSB 153 - Practice Exam Questions... AFSB 151 Simulated Exam CPCU 5
116 terms 84 terms 50 terms 83 terms
mal_whaley Preview andrea_schultz18 Preview mal_whaley Preview mal
Surety The party (usually an insurer) to a surety bond that guarantees to the obligee that
the principal will fulfill an obligation or perform as required by the underlying
contract, permit, or law.
Field Underwriting Activities - Selecting insureds
- Classifying risks
- Determining proper coverage
- Determining the appropriate rate or price
- Providing service to producers and policyholders
Home Office Underwriting Activities - Formulating underwriting policy
- Evaluating experience
- Researching and developing coverages and policy forms
- Reviewing and revising rating plans
- Preparing underwriting guides and bulletins
- Conducting underwriting audits
- Participating in industry associations and advisory organizations
- Conducting education and training
Why is bond underwriting one of the most challenging Because underwriters within it perform extensive financial and credit analysis;
underwriting fields? which are the basis of bond underwriting.
How do you think bond underwriting differs from Differences between the two relate to bond forms and the three-party surety
insurance underwriting? arrangement.
A plumber's license and permit bond is a statutory bond Guaranteeing that the plumber's work will conform to local statues.
A performance bond for contract surety Requires the builder to complete construction per the contract that it has entered
into with an owner.
, A lease bond can Guarantee that the lessee will pay rent regularly. It may also cover the other terms
of the lease, such as turning over improvements to the property at expiration and
even reimbursing the lessor for tax losses under certain circumstances.
What should an underwriter do if the language of a bond The underwriter should consult with senior members of the underwriting
or an associated document is not clear and they're department or with the surety's claims attorneys. Attorneys can help modify the
concerned about an exposure? bond language to ensure accurate exclusion or inclusion of provisions.
Bond forms in regards to insurance The various forms compiled when crafting insurance policies are typically filed
with and approved by insurance departments in each form's issuing state.
Insurance underwriters must choose from these existing forms and do not alter
them.
Bond forms in regards to sureties Sureties have certain standard forms, but do not file bond forms. Some bond
forms are statutory, some obligees or courts prescribe the form they will accept,
and some sureties draft bond forms to cover unique circumstances or exclude
specific elements. Furthermore, a bond may incorporate statutes or other legal
documents by reference, thus extending the obligation beyond the language of
the bond form itself.
How many parties does a surety invovle? Three parties (the obligee, principal, and surety)
How many parties does insurance involve? Two parties (the insured and insurer)
What is the main role of field underwriters? To evaluate individual applicants.
What is the main role of home office underwriters? To set and implement underwriting policy.
What are the main two differences between surety and Unlike insurance underwriters, sureties do not file bond forms, and surety involves
insurance underwriting? three parties, while insurance involves two.
What document is critical for sureties to do business? Indemnity agreements
Subjective factors Form a catchall category for an underwriter's personal assessment of a principal's
character. The underwriter must develop a personal (subjective) method for
judging whether the applicant shows satisfactory evidence of good character.
Financial reports Reveal an applicant's financial condition and reflect the applicant's overall
management ability. The applicant's care in preparation of reports; the
management attitudes that the reports reveal; and the details they provide about
the applicant's use of assets, debt management, and capital formation convey a
great deal about the applicant.
Why do most underwriters require professionally Because financial analysis plays a crucial role in underwriting unsecured surety
prepared financial statements for bond or bond credit obligations.
programs of significant size?
As the size and complexity of an account's bonds So will the need for careful financial analysis by the underwriter.
increase,
