Surety Underwriting - What Exactly Do Underwriters Do?

Surety Underwriting

What Exactly Do Underwriters Do?

Find Your Bond

While learning about surety bonds, you might run across the term underwriting. Why do bonds need to be underwritten? Who performs it, and how? 

When applying for a surety bond, you will need to get approved before the bond can be released. A surety company wants to know a client is reliable and bond-worthy before the bond is issued. It has an underwriting team to analyze different pieces of information, depending on the bond being written. Underwriting can occur at the agency level (common at well-established agencies like Bonding Solutions) or on more complex bond requests; home office surety underwriters may also look at the bond application. Through the underwriting process, an underwriter determines whether a person or an organization should get the bond or not. 

Depending on the bond, you need the final decision depends on many factors. Some bonds are instant-issue, some require a credit check, and others require operational and financial information. To help you understand this process better, we break down everything about surety underwriting below. 

What is Underwriting?

To put things simply, underwriting is the process of reviewing financial and operational qualifications for applicants. This applies to the surety industry. A surety underwriter reviews an applicant’s qualifications and recommends or discourages surety bond support.

To better understand the process, it’s good to refresh our knowledge about surety bonds. A surety bond is an agreement made between three parties – the principal (applicant), the surety, and the obligee (entity requiring the bond). The surety issues the bond to the principal, who needs the bond to operate legally or perform a contract. The obligee is usually a government agency that requires the bond to avoid financial losses. The principal purchases the bond from a surety, the company that assumes the responsibility for covering losses incurred by action committed by the principal. 

Surety companies won’t issue a surety bond to clients who are not qualified. They look for financially stable and trustworthy individuals, which is why underwriting is so important. During the process, underwriters evaluate the client’s financial situation and determine the level of risk associated with the bond. Based on their findings, underwriters can accept or reject the principal’s application. 

What Do Underwriters Do?

As we mentioned above, surety underwriters underwrite for a surety company. Their job is to validate each applicant’s qualifications applying for a bond and approve or disapprove of the bond depending on the risks. 

Depending on the bond being written, an underwriter may need to verify income, run credit, review financials, review contracts, or request collateral for the applicant. Underwriters then calculate the risks from all the collected data.

Three C’s of Underwriting

The three C’s of surety underwriting are Capital, Capacity, and Character. We discuss each C below in detail:


One of the first and most important things all underwriters consider is the applicant’s capital position. In other words, the financial health of the person or company applying got surety credit.  Depending on the type of bond being issued, an underwriter may not need to look at financials. But many bonds required an underwrite to perform a financial analysis to determine working capital, net worth, and the company’s trajectory.  Many times the surety may require a CPA to provide a reviewed financial.


The applicant’s capacity to perform and handle the contract the bond is covering is a crucial part of the underwriting process. To determine the applicant’s capacity, underwriters check previous work references, collect questionnaires, and meet with the client.  They also review their business operations and get to know their processes.


Probably the most important C of underwriting is character. Sureties want to write bonds for principals that will honor their obligations to the bonded contract and, if necessary, indemnify the surety of any loss that may occur. A principal’s character can be tough to underwrite, but some tools underwriters use are credit checks, avoiding bankruptcies, tax problems, and checking references.

Other Things Underwriters Might Look Into 

Underwriters approve surety bonds on a case-by-case basis. All businesses are different, so they consider every factor within the particular industry, company, and more. Therefore, take the Three C’s of Underwriting with caution because there might be many other factors in evaluating your surety bond. Some of them may include:

Bond Type and Cost

The bond type is, of course, taken into account when underwriting. Each bond will be looked at with unique underwriting terms because each bond covers different obligations.

Industry and State Losses:

Some bond types may be experiences losses. That can be on a state or national level. Just because it is easy to write in one state, another state may have claims and litigation that make the underwriting more difficult.

How Long Does Underwriting Take? 

Most bonds do not take long to underwrite. Some underwriting takes 5 minutes, and other cases can take a few days or a few weeks, depending on the bond type, amount, or the obligation the bond is covering. The sooner you submit an application and all the necessary documentation, the smoother and faster the process will be.

Ways to Help Underwriters

  • First thing first, be honest.
  • Find a capable surety agent. A person or a company well-versed in sourcing surety bonds for your industry will be able to provide the much-needed support in placing your surety bond need.
  • Prepare all your documentation. Check with the city, state, or company requiring the bond. 
  • Maintain good credit and make prudent financial decisions.

The Final Word on Surety Underwriting

Underwriting is a pretty simple process that assures the proper analysis of the risk associated with principals applying for bonds, the contractual obligations being bonded, and the market climate surrounding each bond. Regardless of the bond need, Bonding Solutions can help! If you have questions on a particular bond or want more information on underwriting practices please apply here or contact us.


published on Monday, December 28th, 2020


Call us today to speak to a Surety Bond Specialist

(877) 841-6745