The construction recession in 2009 delivered hard blows to the surety market, driving many contractors out of business and severely impacting margins for those who have managed to stay afloat.

For independent agents looking to sell more surety business, that means clients are in dire need of sound suggestions and strategies for success.

“Probably the biggest key for anybody handling bonding is being able to provide your contractors with good bonding advice,” says Jack Anderson, president of Goldleaf Surety. “Contractors may not completely understand what it takes to get and improve their bonding—they rely on the agent for that. If the agent isn’t providing that, he or she may lose the account to someone else that does provide that input.”

Anderson says the primary focus for any agent selling surety must remain on the financial condition, contract language and credit. “The more agents are able to understand the financial statements and credit ratings for the company and the owners of the company, the more successful they’re going to be,” he says. “If you don’t really know how to read those items, it becomes like throwing darts at a dartboard blindfolded.”

Agents should also pay close attention to the contract terms incorporated in construction contracts. “A bond supports a contract,” Anderson says. “If the contract has very negative clauses, that by itself can make the contract un-bondable. Other clauses in the contract can be bonded, but these clauses may be detrimental to the contractor’s profitability at the end of the project. If you don’t know what contract clauses make a project un-bondable, you can spend a lot of time spinning your wheels.”

Contract terms are even more important when it comes to mitigating subcontractor risk—a subset of surety clients that “have been under more pressure than anyone,” says Tom Kunkel, CEO of Travelers Bond and Financial Products. “If you subcontract work out and your sub fails, of course it leaves you in a very difficult situation.”

How can independent agents help? By laying out options for staying on top of the subcontractor risk, “including requiring subcontractor performance and payment bonds,” Kunkel explains. “The most time-tested form of prequalifying subcontractors is really their ability to provide a subcontractor bond back.”

Kunkel has found that successful surety agents take what he calls a “value approach.” “They get to know the customer’s business and understand the risk elements,” he says. “The key is to get to the place where their clients look at the agents and surety together as a trusted adviser.”

That three-way cooperation is key to standing out from other insurance agents that play in the surety market—and helping the contractor understand his or her business in a different, more effective way.

“When agents are looking to be the person that adds value, they should look for a surety that brings the tools to the table,” says Kunkel. “Having professionals such as specialized claims representatives is very important. Agents and brokers can look to their surety to bring unique, insightful forms of expertise to the table that maybe other agents don’t.”

Jacquelyn Connelly is IA senior editor.