Surety Facility Questions
Frequently Asked Questions
Expand a question for more information on ongoing surety capacity, facility limits and repeat bond requirements.
What is a surety bond facility?
A surety facility is an agreed framework under which future bond requirements may be considered within pre-established underwriting parameters and available capacity.
Is a surety facility the same as a bank facility?
No. A surety facility relates to the issuance of bonds or guarantees and does not operate in the same way as a conventional borrowing or overdraft facility.
Does a surety facility guarantee that every bond will be issued?
Not necessarily. Individual requirements can still be subject to wording, contract, beneficiary, exposure and ongoing underwriting checks.
How is the limit on a surety facility calculated?
There is no universal formula. The surety may consider financial strength, workload, existing exposure, contract profile, expected bond demand and other underwriting factors.
What is aggregate surety exposure?
Aggregate exposure generally refers to the total outstanding bond liability being supported at a particular time.
What is a single bond limit?
A single bond limit is the maximum amount of exposure the facility may permit on one individual bond, subject to the facility terms and underwriting.
Can available capacity be reused when a bond expires?
Potentially. Where an outstanding exposure is formally released or expires, that can reduce aggregate exposure and may make capacity available again, subject to the facility terms.
Can a surety facility be increased?
Potentially. If the business grows, strengthens financially or expects greater bond demand, the available limits may be reviewed. An increase is subject to underwriting and market appetite.
Can a surety facility be reduced?
Yes. Deteriorating financial performance, higher workload, increased exposure or other material changes can lead to a review and possible reduction in capacity.
Does a surety facility have to be renewed every year?
Review frequency varies by provider. Many facilities are subject to periodic financial and underwriting review, but the exact timetable depends on the arrangement.
What information is needed to set up a surety facility?
Typical information may include accounts, management accounts, work in progress, order book, existing bonds, expected future requirements, company structure and contract profile.
Can a new company obtain a surety facility?
Potentially, although limited trading history can make the assessment more complex. Funding, group support, management experience and expected bond demand may become particularly important.
Can an SPV have a surety facility?
Potentially, although a project-specific SPV may be more likely to have an individual requirement unless there is a wider repeat bond need or group structure supporting the facility.
Does a facility require a personal guarantee?
Not automatically. Security arrangements vary by market and applicant. Some facilities may be supported by corporate indemnity alone, while others may require additional support.
Does a facility require cash collateral?
Not universally. Collateral can be requested in some circumstances, but the requirement depends on the applicant, exposure and market.
Can multiple bond types sit under one facility?
Potentially. A facility can sometimes cover several forms of surety, subject to the agreed parameters and market appetite.
Can a facility cover more than one group company?
Depending on the structure and market, a surety may consider facilities involving more than one entity within a group, with appropriate indemnity and underwriting arrangements.
Can a bond still be declined even if there is an existing facility?
Yes. A specific bond may fall outside agreed limits, wording, contract size, beneficiary requirements or current underwriting appetite.