The “3 C’s” of Contract Bond Underwriting

contract bond underwriting

Hello and welcome back to Work In Progress. My name is Ben Williams with MG Surety Bonds and this is our show dedicated to surety bonding and all things construction. Today we’re going to be giving you some insight into contract bond underwriting so you can make yourself more bond-able. Specifically, we’re going to talk about the three Cs of contract bond underwriting. Let’s get started.

1st C – Capital

Now, as you may have guessed, the first C stands for capital. Capital is what many contractors, and even underwriters, focus on. It refers to all the financial aspects of both the construction company and its owners. For example, underwriters are trained to look at cash, working capital, net worth, debt. Is it manageable? Does the contractor have a bank line? Is it in use? Do their jobs hold up? What about profitability trends? It also refers to the financials of the owners. Do the owners have personal liquidity? Are they invested in other companies or assets that are going to make them take money out of the construction company? You get the idea.

2nd C – Capacity

Now, the second C is capacity and that really refers to a contractor’s ability to perform both the current and future workload. Examples include things like does a contractor have enough equipment? What about the experience of the owners? Have they done this type of work before? Have they done this size of project before? Do they have the necessary estimators, superintendents, and project managers to complete this project successfully? What about skilled labor? Where will they get the labor? Other examples include do they have the right estimating and accounting software systems? Now, these things might sound like overkill to many contractors but, remember, performance bonds and payment bonds are guaranteeing the contract and they’re guaranteeing that you’re going to pay all of your bills, so underwriters are very concerned with these other aspects that will contribute to your success.

3rd C – Character

The third and final C is character. Now, character has nothing to do with whether a contractor is nice or likable, although, let’s be honest, that never hurts. Character is really the intangibles of how they deal with key stakeholders, such as employees, lenders, surety bond underwriters, and even employees. For example, an underwriter is going to look at will the contractor present truthful and accurate information? What about what will they do if something goes wrong? Will a contractor stick around and honor their commitments or will they run and hide and try to shelter assets? These things are all key in deciding whether or not to provide surety capacity.


We hope you found this information helpful. If you’re trying to increase your bond capacity, consider the three Cs and how you can make yourself more attractive to a bond company. Make sure you hit that subscribe button so that you get all of our content in the future. And, again, we’d love for you to comment below with ideas and suggestions for future episodes. I’m Ben Williams. This is Work In Progress. Thanks, we’ll see you next time.