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Be a Code Breaker! Surety Bonds

The Enigma Machine was a well-known encryption tool that the Germans used to convey coded messages during the Second World War. It encoded a message in billions of ways, making it extremely hard for other countries during the war to crack German codes.

You’ll learn how to crack a code in this article, how to fix a mystery in 20 seconds or less each moment. It is a secure bond mystery: the main component determining the bond’s nature and predicting the effective underwriting route.

Here are your clues.

  • “KNOW ALL MEN BY THESE PRESENTS:” These phrases constitute the prevalent start of security bonds. You will see them again and again.
  • “WHEREAS” will begin one or more paragraphs describing the bond-related conditions.
  • “NOW THEREFORE, THE CONDITION OF THIS OBLIGATION …” is the start of the bond pledge. It is the bond guarantee point and it determines the route of subscription.

Find the paragraph “NOW THEREFORE” and break the code. What’s the guarantee? If a contract is performed correctly, the underwriting will relate to the capacity of the applicant to finish the job. The underwriting will concern the credit history and economic strength of the applicant if the guarantee is to pay cash when due. It’s meaningful.

Test your new skill

Have you ever heard about an ARC bond? Probably not, but here you need to evaluate the “Now So” clause:

NOW THEREFORE, THE CONDITION OF THIS OBLIGATION IS IMPORTANT that if the Principal duly complies with the provisions of that Agreement in respect of all amounts owed to the Obligee, as provided for in that Agreement, during the term of that bond as provided below, then that obligation to be void, otherwise it shall remain in full force and effect in law …

OK Code Breakers, what can we conclude?

  • It promises to comply with an arrangement, so we’re going to want to review it.
  • The applicant must comply with “all sums owed to the Obligee,” so the bond will ensure that cash will be paid in the future.
  • How can we determine if this is probable to happen? Need to get economic and credit information about the customer.

So you’re going there! You scoped it out in 20 seconds, and you already have an idea of underwriting, putting trouble, and prospective markets that might have an appetite.

In the NOW THEREFORE clause, the underwriting route always follows the nature of the guarantee. Breaking the code is that easy!

Steve Golia is Bishop of Marketing. For FIA Surety, a site, subdivision, bid and performance bonding firm since 1979.

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