Surety Placement Services, LLC represents over 30 A rated sureties.  In order to best serve our clients we always seek to place our clients’ business with sureties that offer not only competitive terms, but also long term stability.  Thus, we monitor our sureties and other top sureties’ financial performance.  Unfortunately, the trying economic times of the last several years has resulted in mixed performance for a number of sureties.  This can present added risk for clients who have received bonds or bonding lines from these sureties.  Therefore, we wanted to pass along the following exerpt from the business wire in regards to First Sealord Surety, Inc.  We are not appointed with First Sealord and therefore do not place business with them.  However, perhaps you have clients who have bonds with them who may want to discuss alternatives. 

For more details, please see the following exerpt (source:  Business Wire) or the full article linked below:

“A.M. Best Co. has downgraded the financial strength rating to C (Weak) from A- (Excellent) and issuer credit rating to “ccc” from “a-” of First Sealord Surety, Inc. (FSSI) (Villanova, PA). Both ratings remain under review with negative implications.

The rating actions reflect the increased uncertainty that FSSI’s stock purchase agreement with Torus National Insurance Company (Torus) (Wilmington, DE), originally scheduled for January 2011, will close, as well as A.M. Best’s expectation of significant deterioration in FSSI’s financial condition during the fourth quarter of 2011.

The ratings were placed under review with negative implications on December 2, 2011, reflective of a significant decline in the company’s capitalization as of September 30, 2011, which was driven by reserve strengthening on prior accident years and the potential for additional deterioration in FSSI’s financial condition. As a result, the company implemented a quota share reinsurance agreement intended to provide immediate capital relief. FSSI also entered into a stock purchase agreement with Torus, which would have ultimately improved its financial condition.

The ratings will remain under review pending discussions with management to accurately assess the financial condition of FSSI. If the transaction with Torus does not close or other capital replenishment initiatives do not materialize, further negative rating pressure is probable.”

http://finance.yahoo.com/news/m-best-downgrades-ratings-first-210500921.html

U.S. Reps. Mick Mulvaney, R-S.C., and Richard Hanna, R-N.Y., have introduced legislation to bolster the integrity of the federal bonding process by making certain that the assets supporting noncorporate surety bonds are sufficient and in the care of knowledgeable authorities. “This legislation will increase transparency and restore the faith of long-overlooked subcontractors and suppliers, who no longer have to fear they will not receive payments they are owed,” Mulvaney said. “I spent more than 30 years in the industry and saw firsthand the damage that can occur when inadequate bonding was secured for a project,” Hanna said.

The effect of this legislation will be to further the importance of working with reputable sureties to obtain bonding and should bolster the industry as a whole.  It is also hoped that this will add more certainty to the construction industry and spur new jobs.  Follow the link to continue reading.   

http://www.constructiondigital.com/innovations/legislation-strengthens-surety-bonding-to-spur-projects

Surety bonds aren’t the only way to skin a cat when negotiating a contract.  However, they are a time tested and reliable solution.  Often times that is the most important factor when determining how to secure a project against unforeseen events.  That is something a Utah County found out the hard way.

Tooele City, Utah, took property rights as a performance bond in dealing with a developer, but would have had to buy out superior liens to sell the land after the development project ran into trouble. As a result of that trouble and a previous situation, “we simply do not accept property anymore,” said City Attorney Roger Baker. 

To read the entire story, click on the link below.

http://www.tooeletranscript.com/view/full_story/16527223/article-Officials-say-uncompleted-infrastructure-poses-rare-problem-for-government?instance=home_news_left

The attached article indicates that contractors are hurting from a downturn in government projects, and while the surety industry is healthy, the next few years could bring losses, experts said. “Government spending is down fairly significantly this year. If they’re not building, the contractors aren’t working and fewer bonds are being written,” said surety Vice President Roland Richter. Nonetheless, the industry has more capital than it did 10 years ago.  While we expect most sureties to weather the storm.  Some may suffer losses and, as a result, their appetite for various bonds types may change.  That is why it is critical to maintain multiple surety avenues.  Surety Placement Services has over 30 appointments with national sureties, therefore, we almost always have an avenue to place a bond. 

  http://www.businessinsurance.com/article/20111113/NEWS07/311139995?tags=|59|306|308|76|303

Tampa, Fla.-based Pro-Fit Development is about to lose a $124,000 contract awarded to it by the city. The company’s bond insurance didn’t meet the City Council’s requirements as it wasn’t rated or on a Treasury Department list of acceptable insurers, said Louis Moore, the city’s director of purchasing and materials management. Pro-Fit has had a contract canceled before with the city. It also has defaulted on a business loan.

http://www.tampabay.com/news/localgovernment/st-petersburg-scuttles-second-contract-with-builder/1131651

Lawmakers have figured out that it would cost more to implement the 3% withholding tax on federal contractors and want to repeal it, but how to fill the budget gap of the $11 billion it was supposed to bring in is a problem. Republicans have suggested taking some funds from the administration’s discretionary funds. The rule originally seemed to make sense to collect back taxes, but “[o]nce the unintended consequences were exposed … this thing was seen for what it is — a jobs-killing, economy-killing effort,” said a U.S. Chamber of Commerce vice president. NASBP has drafted a position brief stating that the tax would be a significant burden on small firms and has written a comment letter on the issue.

http://www.washingtontimes.com/news/2011/oct/23/contractor-tax-withholding-not-a-simple-fix/?page=all

In another example of how the surety industry can provide the necessary bridge to complete a project, a mining company, its subsidiary and the federal government will pay for the cleanup of a uranium mine on an Indian reservation that was closed three decades ago. More than 30 million tons of radioactive waste rock and ore remain at the mine, which opened in the 1950s. As part of the deal, the mining companies will provide $151 million in performance bonds.  To read more about the project, see the following story in the Spokane, WA Spokesman-Review.

 http://www.spokesman.com/stories/2011/oct/01/feds-midnite-mine-operators-reach-deal-on-cleanup/

A contractor halted work for months on a streetcar track renovation in Louisiana, leaving the bonding company responsible to make sure the work was completed or the transit authority reimbursed. In August, the contractor returned to the project, and officials said they have been happy with the work since then. The project is split into 11 parts, but the company is contracted only for the first phase.

    http://www.nola.com/traffic/index.ssf/2011/09/st_charles_avenue_streetcar_tr.html

The federal Small Business Transportation Resource Center offers help to small businesses in the transportation industry. The federal agency assists small contractors in getting work from the U.S. Department of Transportation, securing loans and getting surety bonds. It will hold a training session this month to teach small businesses how to obtain transportation-project bonds.  This is an excellent resource for contractors interested in becoming bondable, which can be difficult without a recent track record.  For more information check out the full article.

http://www.heraldnet.com/article/20110829/BIZ/708299978/1005