Anyone who has applied for a surety bond recently knows the market has drastically changed over the past couple of years. As a broker I can tell you, people are shocked and down right outraged at times when they find out what the going surety bond rates of your average T-listed bonding company.
A couple years back you could apply for a surety bond without even having your credit pulled, not to mention the bond rates were a fraction of the price. I had one gentleman call me yesterday about a motor vehicle dealer bond; he was outraged when he found out what his bond would cost annually, even going as far as to tell me I was giving him the “rip-off rate” (a rate we do not offer).
Why the high premiums and occasional cash collateral? Bonding companies had a massive amount of claims over the past couple of years. One underwriter told me that they had more claims in the past two years then the previous ten! Many Bonding companies dropped in their ratings and some had to close their bond department. Since then, sureties began pulling credit reports and raising surety bond rates to help cover loses. If you had bad credit you were denied throughout the country. More recently, bad credit surety bond programs came about; approving principals even with bankruptcies for large premiums and cash collateral.
What can you do about the current bond market? Keep your credit clean, (read our previous post: Bad Credit Surety Bonds) and do not submit your applications to more than two bond agencies max. When one bond agency submits to a surety it closes the door for other agents to get quotes from the same surety (the sureties do not look kindly upon clients browsing prices). Your best bet is to find an agency with many bonding companies at their disposal.
The surety bond market has changed, but like any market it is cyclical and will eventually return to lower rates. For now, keep your credit clean and be content with a rate that is two or three times as high as what was paid a couple years back. With any luck, everyone will have smiles ear to ear in a couple years with the return of the low rate surety bond market.