Be a Code Breaker! Surety Bonds

Be a Code Breaker! Surety Bonds

Be a Code Breaker! Surety Bonds

 

 

 

The Enigma Machine was a famous encryption device used by the Germans during WWII to transmit coded messages. It allowed for billions of ways to encode a message, making it incredibly difficult for other nations to crack German codes during the war.

In this article, You will learn how to break a code, how to solve a mystery in 20 seconds or less – every time. It is a surety bond mystery: The key element that determines the nature of the bond and predicts the successful underwriting path.

Here are your clues.

  1. “KNOW ALL MEN BY THESE PRESENTS:” These words are the common beginning of surety bonds. You’ll see them over and over.
  2. “WHEREAS” will start one or more paragraphs which describe the circumstances in connection with the bond need.
  3. “NOW THEREFORE, THE CONDITION OF THIS OBLIGATION… “ is the beginning of the promise in the bond. It is the point of the bond guarantee and it determines the underwriting path.

Find the “NOW THEREFORE” paragraph and you can break the code. What does it guarantee? If it is the correct performance of a contract, the underwriting will concern the applicant’s ability to complete the work. If the guarantee is to pay money when due, the underwriting will concern the applicant’s credit history and financial strength. It makes sense.

Test your new skill

Ever hear of an ARC bond? Probably not, but here is the “Now Therefore” clause for you to analyze:

NOW THEREFORE, THE CONDITION OF THIS OBLIGATION IS SUCH that if the Principal shall duly comply with the provision of said Agreement with respect to all amounts owed to the Obligee, as in said Agreement provided, during the term of this bond as hereinafter provided, then this obligation to be void, otherwise to remain in full force and effect in law…

OK Code Breakers, what can we conclude?

  1. It promises compliance with an agreement, so we’ll want to review that document.
  2. The applicant must comply with respect to “all amounts owed to the Obligee,” so the bond is guaranteeing the payment of money in the future.
  3. How can we determine if they are likely to do that? Need to get financial and credit info on the client.

So there you go! In 20 seconds you scoped it out and already have an idea about the underwriting, difficulty in placing, and potential markets that may have an appetite.

The underwriting path always follows the nature of the guarantee, which you will find in the NOW THEREFORE clause. It’s that simple to break the code!

 

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