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SuretyDIGIT Coalition Launches to Propel Digitization Efforts in the Surety Bond Industry

MALVERN, Pa., May 09, 2024–(BUSINESS WIRE)–The SuretyDIGIT Coalition announced their launch today. The goal of the coalition is to bring stakeholders together to modernize and digitize surety bond operations. Due to the innate multi-party nature of the surety bond industry and the bonding process, insurance carriers (sureties), brokers, agents, solution providers, government agencies, obligees, (and others) need to work together to reinvent processes with a digital focus. The coalition is committed to paving the path toward digital adoption and bringing together thought leaders and solution providers to impact the industry through digital transformation. SuretyDIGIT’s mission is to bring the industry together to demonstrate the support for saving the industry time and money by wide-spread digital adoption of the entire surety bond process. “By joining the SuretyDIGIT coalition, NASBP and its members can stay at the forefront of surety bonding digital transformation and innovation with other interested parties. This critical, collective endeavor offers the promise of unlocking a digital future for surety bond processing and bringing needed efficiencies and added security to surety transactions,” said Mark McCallum, CEO of National Association of Surety Bond Producers (NASBP). “At its core, the journey toward digitizing the surety bond industry is uniting all stakeholders and gaining alignment and uniformity. As the Surety Digit Coalition expands, so does the knowledge, expertise, and perspectives. Together, we are able to unite all stakeholders on a common path toward digital adoption,” said Peter Miller, President and CEO of The Institutes. The coalition aims to bring all parties together to strategically align on a digitally focused future for the surety bond process, with an initial focus on: The SuretyDIGIT Coalition welcomes prospective members and encourages organizations, individuals, solution providers, insurance organizations, and associations to join. The list of 20+ initial business members is available on the coalition’s website. For more information about the coalition or to join, please visit https://www.suretydigit.org/ or contact [email protected]. About SuretyDIGIT Coalition The Surety Digitization, Innovation, and Transformation Coalition (SuretyDIGIT) is a group of aligned stakeholders – welcoming to government, surety industry partners, associations, and others – fostering a belief in the value of sharing conversations about driving the digital bond process. The coalition’s objective is to digitize key components of the surety bond process such as digital signatures, seals, POAs, bonds and their electronic delivery and authentication. For more information, please visit https://www.suretydigit.org/.

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How Chubb Is Navigating Coronavirus and Its Impact on Growth

Chubb Chairman and CEO Evan Greenberg insists his global P/C insurer has strong fundamentals, but warned at the same time that the ongoing pandemic crisis will spur unpredictable revenue challenges affecting many lines of coverage. Broadly speaking, the insurer will likely take hits on the liability side and earnings via at least a temporary reduction in premium revenues, Greenberg explained during an April 22 investor call held to discuss Chubb’s Q1 2020 earnings. “Our growth momentum, particularly in our commercial [property/casualty] business globally, continued into April, and we continue to experience improved rate to exposure,” Greenberg said. “As we go forward, offsetting that, will be a meaningful impact to growth from the health and economic crisis as exposures in important areas shrink for a time, with the impact varying by country.” Reduced Exposures Consumer-related lines including travel insurance, A&H “discretionary purchases” and automobile insurance will all take hits, as customers ride out stay-at-home orders or quarantines. Commercial lines are also vulnerable, he said, “where exposures are reduced while businesses are closed, or as they reopen and are diminished, or simply go out of business.” He expects trade credit, surety and workers compensation to also be affected by reduced exposures. “It will be pretty broadly based,” Greenberg said, noting the pandemic “has created exposures for clients and industries broadly.” Beyond that, Greenberg emphasized that the company does not give specific forward guidance, and that it is hard to specify how much of a revenue impact it will face in the months ahead. “In this case the degree of revenue impact is simply unknowable,” Greenberg said, though he added that Chubb’s fundamental condition is otherwise solid and thriving. “We are and will continue to benefit in terms of growth from improved technical conditions, as many insurance companies take actions to reduce exposures or improve their rate to exposure to correct for inadequate underwriting,” Greenberg noted. In trying to draw a parallel to past events, Greenberg said that for now, the COVID-19 crisis seems manageable even with its uncertainties. “From what we know now, this will be a manageable, cat-like event,” Greenberg said. “However, from an exposure we really don’t discretely price for … its impact is additive to our normal projected loss exposure. In a sense, it is like terrorism exposure was before 9/11.” Business Interruption Greenberg emphasized multiple times that the insurer’s capital position is “strong,” and insisted “Chubb will continue to operate at a high level.” He noted, for example, that the insurer is working to keep its 33,000 employees around the world safe by way of “aggressive work-from-home protocols” and reiterated that they have secure jobs with no-layoffs during the crisis. He also said the company is maintaining standards about how it supports customers and distribution partners, and also extending payment terms and taking other measures to support clients and others facing pandemic stresses. “We are operating around the globe as a normal company during abnormal times,” Greenberg said. Greenberg strongly opposed the pressure from states and trial attorneys to force carriers to retroactively cover business interruption claims for COVID-19 losses. He spoke on the topic recently. “That is retroactively changing contract and increasing our exposures,” Greenberg said. “That is unnecessary harm and would do great damage.” He had harsh words for trial attorneys seeking to force the change through the court system. “Lawyers and the trial bar would come to torture the language on our standard industry forms and try to prove something exists that actually doesn’t exist, and try to twist the intent when the intent is very clear,” Greenberg said. “The industry will fight this tooth and nail. We will pay what we owe.” https://www.insurancejournal.com/news/national/2020/04/27/566365.htm

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Wet Ink Signatures Requirements May Fade After Coronavirus

pril 10, 2020, 4:56 AM; Updated: April 10, 2020, 10:34 AMListen In-person signatures were on decline pre-virus Global pandemic has accelerated use of eSignatures, expert says Gabe Teninbaum was stuck in a precarious situation when he had to close on his mortgage refinance on March 24. At this point, states were in lockdown due to the coronavirus outbreak. Teninbaum, who is director of the Institute on Law Practice Technology & Innovation at Suffolk University Law School in Boston, said he called his bank to ask whether the transaction could be done electronically, but “the short answer was no.” The bank said Teninbaum could not delay the closing while keeping his refinancing rate, so he felt he had to act. Teninbaum drove with his wife and young children to the bank’s law firm. His family waited in the car while he went in to sign. The office was empty except for the attorneys involved, he recalled. They wore blue surgical gloves and “cloroxed everything.” After he signed about 50 documents, he went to the car and it was his wife’s turn. The wet signature requirement, that a document be signed in-person and with ink, could see its demise as social distancing practices take hold across the globe in an effort to stop the spread of coronavirus. Covid-19, as the disease caused by the virus is known, has accelerated the already growing use and acceptance of electronic signatures to such an extent that wet signatures may soon become relics for attorneys. We’re “clearly at an inflection point” and “there will be no turning back,” said Margo H.K. Tank, the co-chair of DLA Piper’s U.S. financial services sector practice in Washington. Rise of eSignatures Since two pieces of legislation—the Uniform Electronic Transactions Act in 1999 and the Electronic Signatures in Global and National Commerce Act in 2000—were enacted, the use of eSignatures has steadily made inroads into almost every type of consumer and commercial transaction, like signing on pads when shopping at the grocery store or pharmacy. Forty-eight states, plus Washington, D.C., Puerto Rico, and the U.S. Virgin Islands have adopted some form of the UETA, Tank said. New York and Illinois have their own electronic signature law, she added. The ESIGN Act was enacted to make sure the states didn’t vary from uniformity in their adoption of UETA, she explained, calling it a “federal backstop” to UETA. Both are procedural laws saying if a document requires a signature, the signatories can use eSignatures because they have the same legal status as ink signatures, Tank said. Electronic signatures are used roughly equally in consumer and commercial transactions, Tank said. And lawyers who “understand the law underpinning their use,” are also “eager” to use them, she said. However, there are certain legal transactions not within ESIGN’s scope that are still done in person, including wills, testamentary trusts, adoptions, and divorces, Tank said. But states can and have enacted their own laws to enable eSignatures in such matters. Tank said the question right now is how lawyers and clients can do business in the current climate if they can’t e-sign. She pointed to the example of online notarization, which has been “exploding” in the wake of the virus. Before coronavirus, 23 states allowed remote online notarization. Now, at least 19 states have enacted emergency, short-term measures to enable RON. Legal Implications Lawyers have to follow the law when wet signatures are required, even though it may expose them and others to the coronavirus. The insistence on wet signatures on documents “is causing all kinds of distancing issues for lawyers doing closings,” Lucian T. Pera said in an email. Pera is an attorney with Adams & Reese in Memphis whose practice includes legal ethics. These are often very important transactions involving real estate where courts have historically been difficult about any deviations from the traditional or required elements, Pera said. For example, for an affirmation with a formula that requires the signature in the presence of the notary, there “may be no legitimate substitute for the notary and signer being in the same physical space, even if 6 feet apart,” he said. “My sense is that some lawyers are simply doing this in person, even under a shelter-in-place order,” Pera added. The benefits of using eSignatures instead of wet signatures in the age of Covid-19 “far outweigh the negatives,” said Connor Jackson. Jackson is a founding partner of the national healthcare firm Jackson LLP whose practice focuses on regulatory compliance in telemedicine. He is based in Evanston, Ill. But there are some things to be cognizant of, including authenticity, he said. “It’s crucial to confirm that the email address being used for obtaining the e-signature is unique and private to the signer,” Jackson said. If it’s not, then authenticity can’t be verified beyond confirming that someone with access to that email address signed the document, he explained. If an entire family uses the email address [email protected], for example, and Jane Doe is trying to digitally and securely sign something, “most programs would technically permit anyone with access to that email account to assert that they’re Jane and to execute the document on her behalf,” Jackson said. Reflecting on his closing experience, Teninbaum said he doesn’t see economic benefits to requiring wet signatures. For the firms, offices aren’t necessary and they can save copying and related costs, he said. For the consumer, they can save time and money by avoiding travel. Teninbaum said wet signatures remain a common practice, like a lot of legal practice processes, simply because of inertia. “The more I thought about it, the situation was emblematic of everything that’s broken with the legal system,” Teninbaum said. “If we just paused and evaluated the way we work in light of new tools and technologies, situations like this one wouldn’t occur anymore.” https://news.bloomberglaw.com/tech-and-telecom-law/wet-ink-signatures-requirements-may-fade-after-coronavirus

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Social Distancing, Shelter Orders Impede Construction Bonds

The surety industry is asking federal, state and local officials to take emergency action to update decades-old surety rules requiring stamped notarizations and ink signatures that the Covid-19 pandemic has made impossible or more difficult while social distancing and shelter rules are in place. The industry seeks permission to use electronic signatures without notarization of bond documents. Otherwise, the sureties and bond producers claim, the interruption in the normal issuance of sureties required for most public works and many private projects, could hold up construction projects—and inflict further injury on the economy. Latest Updates on the Coronavirus Pandemic The Surety and Fidelity Association of America, the trade association of sureties, and the National Association of Surety Bond Producers, representing brokers and agents, are asking government officials to act quickly. “Pandemic shelter-in-place requirements,” the two associations said in a joint statement, “make traditional signatures and notary requirements unworkable.” In a letter to Congressional leaders, the two associations pointed out that many federal agencies require surety documents to have “wet ink signatures” on surety bonds and embossed corporate seals on original, printed documents. Stay-at-home orders and adherence to health directives and guidelines make it virtually impossible for bond producers, acting as attorneys-in-fact for surety companies, and their contractor or commercial business clients to sign the surety documents in person.” Unlike other federal agencies, the General Services Administration does accept electronic digital signature technology. An Office of Management and Budget memo issued last month encouraged streamlining of approval processes for critical services. Remote online notarization isn’t a workable alternative, the associations argue, because it has not been approved in many states or become widely used. Where it is approved, it requires prior certification of the notary. “A majority of these construction surety bonds are required for infrastructure projects directly related to health, safety and the growth of our economy,” says SFAA chief executive Lee Covington. “It is imperative to adopt a solution immediately for work on these critical projects to begin and continue, while maintaining important protections for small business construction firms, workers and taxpayers.” Commercial surety bonds are used in other occupations. For example, utility bonds ensure that utilities will be paid on time, license and permit bonds guarantee that regulations and rules are observed and public official bonds provide security in case a public official violates the public trust in handling money or private information. To some extent, says NASBP chief executive Mark McCallum, “Commercial surety is further ahead than contract surety because some commercial surety is more transactional in nature, where the same transaction is performed over and over with more volume.” One of the most recent examples of moving a commercial surety type into an electronic system, adds McCallum, was a result of the mortgage and financial crisis of 2008 and 2009. An electronic system set up for those bonds has been adopted in many states. https://www.enr.com/articles/49104-social-distancing-shelter-orders-impede-construction-bonds

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Coalition Letter to President Trump on Essential Infrastructure

April 6, 2020 The PresidentThe White HouseWashington, DC 20500 Dear Mr. President: We, the undersigned trade and professional organizations representing tens of thousands of firms and individuals engaged in architecture, engineering, surveying and mapping, prime contracting, subcontracting, specialty trade contracting, supplying, construction and program management and surety bond production would like to join with the many other organizations in urging further guidance to clarify “essential Infrastructure” and “essential businesses and services.” As the nation and your Administration contend with the real threats presented by COVID-19, we want to encourage the issuance of exemptions for operations and maintenance of “essential infrastructure” that allows individuals to provide such services that are impossible to perform from home. Such infrastructure should include essential design, construction and related services of public works, including airport operations, roads and highways, public transportation, energy, and of critical importance today, expanding, retrofitting, and rehabilitating structures to meet healthcare and other systems and facilities related COVID-19 production needs. This work is essential to our nation’s ability to deliver what is needed during this emergency. These include medical services and supplies, food, and daily necessary goods to the American people. The current version of DHS guidance, Identification of Essential Critical Infrastructure Workers, continues to have ambiguities that require clarification. We respectfully urge the broadest definition of the services, occupations, and projects our organizations represent so that we serve our fellow citizens, operate in a safe manner in accordance with CDC and other relevant protocols, contribute to the effort to combat COVID-19, and sustain our economy in these difficult times. We look forward to working with you and your Administration so the various related industries we represent can continue our work of providing necessary construction and related services to the nation and doing our part to see us through this pandemic. Sincerely, American Council of Engineering CompaniesAmerican Society of Civil EngineersAmerican Subcontractors AssociationAssociated General Contractors of America​Construction Management Association of AmericaCouncil on Federal Procurement of Architectural and Engineering ServicesDesign-Build Institute of AmericaGeospatial Equipment and Technology InstituteIndependent Electrical Contractors​International Institute of Building Enclosure ConsultantsNational Association of Surety Bond ProducersNational Electrical Contractors AssociationNational Society of Professional SurveyorsSheet Metal and Air Conditioning Contractors National AssociationSubsurface Utility Engineering AssociationSurety & Fidelity Association of AmericaU.S. Geospatial Executives OrganizationWomen Construction Owners & Executives

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QBE backs down on trade credit controversy

Insurance giant QBE has made a dramatic U-turn on its sudden decision to withdraw from the trade credit insurance market following major pushback from the construction industry and the federal opposition. On Saturday QBE told customers it would no longer provide trade credit insurance for businesses with a limit of less than $US250,000 ($410,000), in an effort to protect itself from the fallout from the coronavirus crisis. That meant suppliers selling on credit products worth up to $410,000 would not be insured in the event that some customers failed to make the payment. Many suppliers cannot afford to sell on credit without trade credit insurance. But following a flood of complaints and media scrutiny, including in The Australian Financial Review, and amid warnings that the move could bring much of the construction industry to a screeching halt, QBE said it would reinstate around 7000 of the 9000 blacklisted companies. However they would only be covered for 50 per cent of their original limit. A QBE spokesman said those 7000 businesses included “key businesses in the construction industry whose feedback we have heard and responded to”. Debra Bourke, the owner of the Macarthur Frames and Truss factory in western Sydney that supplies the building industry, many of whose customers were blacklisted by QBE, said the U-turn did not go far enough. Ms Bourke learned of QBE’s original decision on Monday morning from her insurance broker. “I went into a panic situation,” she told the Financial Review before QBE announced its backtrack. “Without that cover I would have no choice but to shut up shop.” She said if building suppliers were forced into hibernation, a big part of the construction industry could be forced to shut down. “If we don’t supply frames and truss to sites, there are no bricklayers, carpenters, plumbers, nothing. It all stops. And then you have millions of people lining up for Centrelink,” she said. She tried to negotiate with QBE for a solution, without success. So she wrote to her local MP, who forwarded her complaint to shadow financial services minister Matt Thistlethwaite. Mr Thistlethwaite called QBE, and after some wrangling, the insurer was persuaded to make some concessions for Ms Bourke She said she was concerned other suppliers to the building industry wouldn’t get the same special treatment. “We are one of those industries that is able to function [during the coronavirus crisis] and not put pressure on the government. But they do this to us and we will just be another tragic story of an industry forced to shut down.” Trade credit insurance policies give the supplier payout limits for each of its customers. If a customer limit is $1 million, the policy will cover the supplier for unpaid invoices of up to $1 million for that customer. At the weekend QBE withdrew cover on a large number of businesses with a limit of $US250,000 ($410,000), and massively reduced cover for all higher limits. The decision did not apply to essential services such as food, pharmaceuticals, agriculture and telecommunications. Construction was not considered essential. Ms Bourke said while she had never had to make a claim, she would not supply on credit without insurance. A Brisbane-based supplier of plasterboard and other building materials to the construction industry, which asked not to be identified, said if QBE followed through with its plan, then it would have to stop supplying those blacklisted companies. “Do I want to offer $300,000 credit without any guarantee? Not in the current climate,” a spokesman for the supplier told the Financial Review. He said the loss of business would likely knock 25 per cent off revenue and force the company to lay off employees, adding his customers would be worse off still, and some might fold. “If we withdraw cover on them, I think there is a chance they will go broke.” Also speaking before QBE’s late announcement, Graham Wolfe, managing director of the Housing Industry Association, said it was difficult to quantify the impact of QBE’s decision on the construction industry, but it would “have a significant impact on thousands of businesses in the building industry “There are some businesses out there whose supplier now has given them zero credit. They are either going to have to find the cash to pay upfront, or they won’t order. “A lot of our members are citing years and years of loyalty and partnership, and this. It comes as a tremendous shock to do it across the book.” He said the consequences for the industry would become apparent within a couple of weeks. Minister for Housing and Assistant Treasurer Michael Sukkar did not address the specific issue, but said the government would “continue to work with insurance companies who have a responsibility in this Team Australia moment to help their customers get to the other side”. The Financial Review understands QBE has asked the government for help. Matt Thistlethwaite, Labor’s shadow financial services minister, had earlier urged QBE to reconsider its decision. “Many SMEs may not survive, and more workers will end up needlessly entering the unemployment queue. We’ve asked QBE to recondsider their decision at least until insurance contracts are up for renewal. I can understand if they’re talking about new customers, but to do it it mid contract and leave a lot of these business without cover is pretty poor form,” he said. https://www.afr.com/companies/financial-services/qbe-backs-down-on-trade-credit-controversy-20200402-p54gcj

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Germany, credit insurers agree plan to keep trade flowing – sources

MUNICH/BERLIN, April 1 (Reuters) – The German government and the country’s credit insurance industry have agreed to help to maintain insurance cover for tradedespite economic hardship related to the coronavirus outbreak, three people with knowledge of the plan said on Wednesday. Under the plan, the government would guarantee up to 30 billion euros ($32.8 billion) for the commercial credit insurance industry, the sources said. In return, the credit insurers are committing to maintain or even extend their coverage and to pay two-thirds of their premiums to the government this year. The credit insurers, along with the government, would also absorb the first 500 million euros in losses. Credit insurance helps to ensure the smooth flow of trade in goods at home and abroad, especially in the retail sector, protecting suppliers against the risk that customers cannot pay. Germany’s biggest trade credit insurer Allianz-owned Euler HermesALVG.DE declined to comment, as did the GDV insurance lobby, the Finance Ministry and the Economics Ministry. The EU Commission is yet to approve the aid programme. It is expected in the next few days, one source said. https://www.nasdaq.com/articles/exclusive-germany-credit-insurers-agree-plan-to-keep-trade-flowing-sources-2020-04-01

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How COVID-19 impacts surety bond placement

Placing surety bonds has become more challenging with the social distancing precautions underway with the COVID-19 pandemic, but it is possible to do this electronically, says an association representing insurers who write surety bonds. Surety bonds can now be placed without people physically meeting or mailing paper documents, and they are enforceable by law, Steven Ness, president of the Surety Association of Canada, said in an interview. “Anyone who is seriously engaged in the surety business in this country has the ability to provide electronic bonds or digital bonds,” said Ness. “And if you are not, my message to you is: ‘The world is not going to sit still for you. Get yourself into the 21st century if you want to keep doing business.’” Though surety bonds are provided by property and casualty insurers, they are different from insurance contracts in several ways. Surety bonds are three-way agreements for the benefit of the client’s clients. They are not conventional contracts where one party agrees to pay money to a party who supplies something. With a surety bond, the insurer – in this context known as the surety – writes a bond for its customer, often a construction contractor and known as the “principal” for the purpose of the surety bond. If the principal fails to fulfill the terms of its contract, then the surety (the insurance carrier) might have to make a payment to the “obligee,” which is often a construction project owner (a municipality or real estate developer, for example). Often the construction contractor cannot get the job without a surety bond. One risk that surety bonds are intended to transfer is the risk to a project owner if a contractor fails to finish the job or pay its subcontractors and suppliers. Although Ontario is under a state of emergency during the COVID-19 pandemic, many types of construction projects are considered essential – and therefore exempt from the workplace shutdowns. But some brokerages are facing a logistical challenge now in delivering properly sealed surety bonds to project owners and clients, the Surety Association of Canada observes. “Surety bonds are an interesting animal because they are not contracts,” said Ness. “They are deeds, which means they must be executed under seal. It creates a logistical challenge but we have managed to overcome that.” The distinction is important in “common law” provinces because a two-way contract is one in which a seller gets “consideration,” or payment, for what it gives the buyer. So a surety bond is not technically a contract because the obligee, the project owner, is transferring its risk without paying a premium. Instead, it is the principal, not the obligee, that pays the premium to the surety. Traditionally, legal documents were sealed by making some sort of impression in wax or putting self-adhesive wax on to the document, Toronto lawyer Albert Frank wrote in an earlier paper about corporate seals. Today, several vendors in the market offer software and services that deliver sealed and legally enforceable surety bonds, Ness told Canadian Underwriter Tuesday. If you want to use those, the Surety Association of Canada has several pieces of advice. The electronic bonding process needs to have: Integrity of Content: the parties are assured that the document received is the true document executed and the content has not been changed or altered; Secure Access: Only those who are authorized to view or download the document have access; and Verifiability/Enforceability – the parties are assured that the document was duly executed by the parties identified and that it is enforceable in law.

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Swiss Re Americas Issues Public Comment on Treasury’s Fiscal Service Bureau

WASHINGTON, March 6 — Matthew Wulf, head of state regulatory affairs at Swiss Re Americas, Armonk, New York, has issued a public comment on the U.S. Treasury Department’s Bureau of the Fiscal Service notice entitled “Surety Companies Doing Business with the United States; Request for Information”. The comment was written on Feb. 13, 2020, and posted on March 5, 2020: Thank you for the opportunity to respond to the Bureau of the Fiscal Service’s (Bureau) Request for Information (RFI) on the corporate federal surety bond program. The most important element Treasury and the Bureau can address to modernize and improve the surety bond program is to reconcile the inconsistency between state insurance regulation and the Bureau’s current practice regarding recognized credit for reinsurance and required collateral. Treasury should amend its rules to: (1) allow credit for reinsurance that is provided by reinsurers that meet certain stringent requirements such as those contained in the covered agreements and the recently revised NAIC Credit for Reinsurance models and (2) eliminate collateral requirements for non-US reinsurers from reciprocal jurisdictions that are recognized at the state level as meeting stringent requirements protecting U.S. ceding insurers. The Bureau has a historic view that uncollateralized reinsurance recoverables of a non-US reinsurer may not be counted as an asset for a capital and surplus calculation. This position is out of step with the authoritative sources of reinsurance collateral regulation in the United States, i.e., standards set by the National Association of Insurance Commissioners (NAIC) in 2010 and codified in all states’ laws and regulations. Additionally, it is inconsistent with the purpose of the Dodd-Frank Act, Title V, and recent US-EU and US-UK covered agreements. Thus, the inconsistency exists not only between the Bureau and state law, but also between the Bureau and federal law, and within Treasury itself, between the Bureau and the Federal Insurance office (FIO). A minor change to the application process, data considered, and the analytical methods used in evaluating financial condition will resolve this inconsistency and will not result in diminished protection of US government interests. The Bureau should revise its practices and rules regarding credit for reinsurance to align analysis by Treasury with the analysis conducted by state insurance regulators. Additionally, Treasury’s collateral requirements should be consistent with those it has directed state regulators to adopt and those that Treasury has itself negotiated in the covered agreements. These changes will not negatively affect the ultimate ability of a surety company to carry out its contracts and will not harm the financial interests of the United States or its taxpayers. As the Bureau of Fiscal Service explores ways to modernize and improve how it evaluates the financial condition of companies seeking to underwrite and reinsure federal surety bonds or act as admitted reinsurers, it is important to appreciate that notwithstanding the “doing business with the United States” scope of Treasury’s regulation, it has been historically de facto regulation of both governmental and non-governmental surety bond business. Thus, the scope of consideration must go beyond strictly federal surety interests. Responses to specific RFI questions Because Swiss Re’s comments all center on the treatment of credit for reinsurance, the following should be considered responsive to the RFI questions 1, 3, 4 and 5. The practice by the Bureau of Fiscal Service of not recognizing uncollateralized reinsurance that is otherwise recognized on company statutory financial statements by the states is inconsistent with the primacy of state regulation, inconsistent with public policy enshrined in the US-EU and US-UK covered agreements, punitive to companies complying with state prudential insurance regulation, and it does nothing to further protect the financial interests of the United States or its taxpayers. US public policy on reinsurance regulatory collateral requirements has been clearly articulated by Treasury through the Federal Insurance Office via the covered agreements and establishes that financially sound, well-regulated companies may provide creditable reinsurance to US cedents without the need for 100% regulatory collateral. The decision to move from a 100% collateral system for non-US assuming insurers to a system based on financial soundness, business practice, and regulatory reliability was made after years of debate and has proven to be sound public policy. Since non-US assuming insurers began providing reinsurance without 100% collateral in 2010, there has been no corresponding increase in uncollectible reinsurance. In order to be eligible to provide creditable reinsurance to US cedents, non-US reinsurers must comply with rigorous financial statement/condition filing requirements at the state level and their home country must be vetted and approved by a state as a qualified or reciprocal jurisdiction. A Bureau of Fiscal Service determination of credit for reinsurance on a separate basis than the states undermines the state-based insurance regulatory system in the US and could be the basis for a US state to challenge the preemptive authority of the FIO to enforce the covered agreements. Because the Bureau of the Fiscal Service and FIO both sit in Treasury, the failure of one office to recognize the public policy set by another establishes the argument that an integral purpose of the covered agreements is frustrated and without meaning, and therefore is unenforceable. Further, a second key element of the covered agreements is the recognition of US state regulatory authority and prohibition against local presence and other doing business requirements abroad. If the EU or UK believes a covered agreement is not being enforced, non-US countries will be able to retaliate against US companies doing business internationally. Fiscal Service could accomplish the proper credit for reinsurance recognition solely through the annual letter. However, if a change in regulation for clarity is desired, the following amendment to section 223.9 is recommended (new language underlined): Sec. 223.9 Valuation of assets and liabilities. In determining the financial condition of every such company, its assets and liabilities will be computed in accordance with the guidelines contained in the Treasury’s current Annual Letter to Executive Heads of Surety Companies. However, the Secretary of the Treasury may value the assets and liabilities of such companies in his discretion.

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SBA Recognizes FY19 Most Active Surety Companies and Agencies

WASHINGTON, DC – The U.S. Small Business Administration announced on Wednesday its most active surety companies and agencies for fiscal year 2019, which contributed to increases in the Surety Bond Guarantee (SBG) Program’s activity. “The SBA is very fortunate to partner with sureties and agents with a shared vision of assisting small and emerging businesses,” said Peter C. Gibbs, Director, SBA’s Office of Surety Guarantees. “Every year I am amazed by the level of commitment from our partners to increase opportunities for the small business community.” The SBA’s Surety Bond Guarantee Program, in direct partnership with surety companies and their agents, provides surety bond guarantees for small businesses on federal, state, local and private projects. Commercial construction, service and supply contracts and subcontracts are eligible if the contract requires a surety bond. In FY 2019, the SBA’s guaranteed bid and final bonds were more than $6.4 billion in total contract value. With the work of the SBA’s top-performing surety partners and bond agencies, over 1,900 small businesses were assisted and over 30,000 jobs were supported. The standing of each surety partner and agent was determined by the number of bond guarantees they wrote through the SBG Program. The top-performing surety partners for FY 2019 are: American Contractors Indemnity Company, Calif.United States Fire Insurance Company, PaU. S. Specialty Insurance Company, Calif.Travelers Casualty & Surety Company, Conn.United States Surety Company, Md.Markel Insurance Company, TexasDevelopers Surety & Indemnity Company, Calif.Contractors Bonding and Insurance Company, Wash.Navigators Insurance Company, N.J.The Guarantee Company of North America, Mich. The top-performing bond agencies for FY 2019 are: CCI Surety, Inc., Minn.KOG International, Inc., N.J.Nielson, Hoover and Company, Fla.The Fedeli Group, OhioValley Surety Insurance Agency, Calif.Preferred Bonding & Insurance Services, Calif.Pinnacle Surety & Insurance Services, Inc., Calif.The Surety Place, Ariz.Brunswick Companies, OhioCapstone Brokerage, Inc., Nev. https://www.prnewswire.com/news-releases/sba-recognizes-fy19-most-active-surety-companies-and-agencies-300991626.html

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