Surety Association of America Changes Name

The Surety Association of America (SAA) changed their name to The Surety & Fidelity Association of America (SFAA) earlier this year. The name change was made effective on May 18, 2006. The association has always been involved with surety bonds and fidelity bonds, but the name change clarifies that there is a difference between the two.

Many assume that fidelity bonds are a type of surety bond. It is easy to understand why one can misinterpret a fidelity policy as a surety bond. Typically any agency that offers surety bonds also offers fidelity as well. There are numerous different surety bond types, which only adds to the confusion. Rather than memorize a plethora of bond types it is easier to simply learn how each bond type works.

The two products are quite different. A surety bond is a three party agreement involving a principal (who is being bonded), obligee (who is requiring the bond), and carrier (who is backing the bond). The surety bond guarantees the performance of the principal to the obligee. Make no mistake, surety bonds are not insurance, as the bonding company will look to the principal for payment of the claim. This makes a surety bond more of a form of credit than insurance. Traditional surety underwriting is done with the idea of a 0% loss ratio. Fidelity bonds are more of an insurance product, as the principal purchases the policy to insure themselves. There are only two parties, the principal (who is purchasing the bond) and the carrier (who is backing the bond). If a claim arises, the carrier pays out to the principal, who is the beneficiary when it comes to fidelity.

Hopefully the name change of the Surety & Fidelity Association of America will help many to realize that surety and fidelity bonds are not one in the same.